VaR Analysis for the Dollar/Yen Exchange Rate Futures Returns with Fat-Tails and Long Memory

• Main Authors: Cheng, Shih-Wei, 鄭士緯
• Other Authors: Shieh, Shwu-Jane
• Format: Others
• Language: en_US
• Published: 2006
• Online Access: http://ndltd.ncl.edu.tw/handle/37454470173477537056

碩士 === 國立政治大學 === 國際貿易研究所 === 94 === In order to manage the exposure of the dollar/yen futures returns with regarding the long memory behavior in volatility, we use the HYGARCH(1,d,1) model with the data after the Plaza Accord to compute daily Value-at-Risk (VaR) of long and short trading positions. To take into account the fat-tail situation in financial time series, we estimate the model under the normal, Student-t, and skewed Student-t distributions. The contribution of this article is twofold. First, the empirical results show that the bias of in-sample VaR increases as the confidence level increases when VaR is calculated with a fat-tail distribution. Second, we provide a better distribution, the skewed Student-t innovation, for estimating the HYGARCH model for the Japanese yen in respect of risk management because the bias under the skewed Student-t innovation is smaller than that under the Student-t distribution, and in-sample VaR of the models with a skewed Student-t distribution outperforms based on Kupiec test. In addition, we get the innovation skewed to the right through the in-sample VaR analysis.