Value-at-Risk for long and short trading positions: The case of the Athens Stock Exchange

This paper provides Value-at-Risk estimates for daily stock returns with the application of various parametric univariate models that belong to the class of ARCH models which are based on the skewed Student distribution. We use daily data for three stock indexes of the Athens Stock Exchange (ASE) and three stocks of Greek companies listed in the ASE. We conduct our analysis with the adoption of the methodology suggested by Giot and Laurent (2003). Therefore, we estimate an APARCH model based on the skewed Student distribution to fully take into account the fat left and right tails of the returns distribution. We show that the estimated VaR for traders having both long and short positions in the Athens Stock Exchange is more accurately modeled by a skewed Student APARCH model that by a normal or Student distributions.Value-at-Risk, risk management, APARCH models, skewed Student distribution

Long-Run Purchasing Power Parity and Structural Change: The Official and Parallel Foreign Exchange Markets For Dollars In Greece

This paper examines the Purchasing Power Parity theory from a long-run perspective in the presence of a parallel or 'black' market for US dollars in Greece using monthly data for the recent float. Johansen's FIML multivariate cointegration techniques is applied. Recent development associated with this procedure are considered. First, a formal test developed by Paruolo (1996) for the presence of I(2) and I(1) components in a ultivariate context is applied along with the estimation of the roots of the companion matrix for the correct determination of the cointegration rank. Second, given that two significant cointegration vectors were found, structural restrictions identifying the long-run relations of interest are specified as proposed by Johansen and Juselius (1994) and Johansen (1995b). Thus, the joint structure of PPP and long-run informational market efficiency could not be rejected. Furthermore, estimation of the error correction terms shows that the black market rate adjusts to eliminate any deviation from long-run PPP. Finally, stability tests proposed by Hansen and Johansen (1993) are applied and it is shown that the dimension of the cointegration space is simple dependent while the estimated coefficients do not exhibit instability in recursive estimations. [F31 F33]

Expectations and the black market premium for foreign currency in Greece

In this paper an attempt is made to provide an understanding of the black market premium. To this end the operation of the parallel or black market for US dollars in Greece during the recent float is investigated. A series of tests is employed in order to examine the role of changes in agents' expectations about the official exchange rate in determining the black market premium. To test the impact of anticipated and unanticipated shocks to the official exchange rate on the black market premium, the two-step procedure recommended by Barro (1977) and modified by Hoffman et al. (1994) is employed. The main finding of this analysis is that expectations of devaluation cause movements in the black market premium for Greece and this result suggest that portfolio balance models may be appropriate for understanding the behaviour of the black market premium in Greece.

Value-at-risk for long and short trading positions: Evidence from developed and emerging equity markets

The financial crisis of 2007-2009 has questioned the provisions of Basel II agreement on capital adequacy requirements and the appropriateness of VaR measurement. This paper reconsiders the use of Value-at-risk as a measure for potential risk of economic losses in financial markets by estimating VaR for daily stock returns with the application of various parametric univariate models that belong to the class of ARCH models which are based on the skewed Student distribution. We used daily data for three groups of stock market indices, namely Developed, Southeast Asia and Latin America. The data covered the period 1987-2009. We conducted our analysis with the adoption of the methodology suggested by Giot and Laurent (2003). Therefore, we estimated an APARCH model based on the skewed Student distribution to fully take into account the fat left and right tails of the returns distribution. The main finding of our analysis is that the skewed Student APARCH improves considerably the forecasts of one-day-ahead VaR for long and short trading positions. Additionally, we evaluate the performance of each model with the calculation of Kupiec's (1995) Likelihood Ratio test on the empirical failure test. Moreover, for the case of the skewed Student APARCH model we computed the expected shortfall and the average multiple of tail event to risk measure. These two measures helped us to further assess the information we obtained from the estimation of the empirical failure rates.Value-at-risk Risk management APARCH models Skewed Student distribution