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Using Conditional Copula to Estimate Value-at-Risk in Vietnam's Foreign Exchange Market

By Vu-Linh Nguyen and Van-Nam Huynh

Abstract

In this paper, we briefly review the basics of copula theory and the problem of estimating Value-at-Risk (VaR) of portfolio composed by several assets. We present two VaR estimation models in which each return series is assumed to follow AR(1)-GARCH(1, 1) model and the innovations are simultaneously generated using Gaussian copula and Student t copula. The presented models are applied to estimate VaR of a portfolio consisting of 6 currencies to VND. The results are compared with results from two VaR estimation models using AR(1)-GARCH(1, 1) model and the innovations are separately generated using univariate standard normal and Student t distribution

Topics: Copula, Value at risk, AR(1)-GARCH(1; 1), foreign exchange market
Publisher: 'Springer Science and Business Media LLC'
Year: 2014
DOI identifier: 10.1007/978-3-319-13449-9_33
OAI identifier: oai:dspace.jaist.ac.jp:10119/13485
Provided by: JAIST Repository

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