Non-Parametric Future Looking Value-at-Risk
15 Pages Posted: 5 Feb 2011 Last revised: 27 Feb 2011
Date Written: February 4, 2011
Abstract
This paper proposes a new model for computing Value-at-Risk forecasts. The model is fully non-parametric and easy to implement. Further, it incorporates information about the markets perceived uncertainty about the future. The future looking information is obtained from the option market via CBOEs implied volatility index VIX. Using SP500 data from 1990-2010 we find that the new model compares favorably to extant models in terms of its forecast performance.
Keywords: Value-at-Risk, Non-Parametric, Implicit Volatility, VIX
JEL Classification: C14, C53, G17, G32
Suggested Citation: Suggested Citation
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