Modeling and Forecasting Market Value-at-Risk of DS30 Index through GARCH Family Models with Heavy Tail Distribution

Md. Monimul Huq; *Md. Ayub Ali

Abstract

In light of the latest global financial crisis and the ongoing sovereign debt crisis, accurate measuring of market losses has become a very current issue. One of the most popular risk measures is Value-at-Risk (VaR). A set of symmetric and asymmetric GARCH type models based on various error distributions were applied on Dhaka Stock Exchange DS30 Index from January 28, 2013 to May 29, 2017 for estimating and forecasting the market Value-at-Risk of the index. The most adequate GARCH family models for estimating volatility in the Dhaka stock exchange was found to be as the asymmetric TGARCH (1,1) model with GED. TGARCH (1,1) model with GED was allowed by Kupiec test with 99% of confidence level. The proposed VaR model would help the investors in their emerging capital markets.

Keywords

Value-at-Risk, GARCH-type models, backtesting, DS30 and Heavy tail distribution.

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Cites this article as

M. M. H. , *. A. A. , "Modeling and Forecasting Market Value-at-Risk of DS30 Index through GARCH Family Models with Heavy Tail Distribution", International Journal of Innovative Research in Engineering & Management (IJIREM), Vol-5, Issue-4, Page No-129-134, 2018. Available from: