Normality assumptions and risk management: an application of the parametric var via goodness-of-fit test

Authors

  • Herick Fernando Moralles Universidade de São Paulo - USP
  • Alexandre Sartoris Neto Universidade Estadual Paulista júlio de Mesquita Filho - UNESP
  • Daisy Aparecida do Nascimento Rebelatto Universidade de São Paulo - USP

DOI:

https://doi.org/10.14488/1676-1901.v14i2.1130

Keywords:

Parametric VaR (Value-at-Risk). Normality. Kolmogorov-Smirnov.

Abstract

Given the weaknesses of the parametric VaR (Value-at-Risk) calculated by normality assumptions, this paper develops a method of parametric VaR calculation considering ten different probability distributions. Specifically, the distribution to be used for the VaR calculation of a specific asset or portfolio is indicated by the Kolmogorov-Smirnov goodness-of-fit test. Additionally, the study compares the normality assumptions applicability for the VaR calculation of both individual assets, and to a large portfolio, in the context of market stability. The experiment makes use of a sample of 15 individual assets traded in the Sao Paulo Stock Exchange and the IBOVESPA index, collected in the Economática® database. The goodness-of-fit tests and VaR calculations are performed by a program developed in MATLAB7.1®. This investigation demonstrates that the assumption of normality brings good risk estimates for large portfolios and individual assets.

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Author Biographies

Herick Fernando Moralles, Universidade de São Paulo - USP

Departamento de Engenharia de Produção da Escola de Engenharia de São Carlos da Universidade de São Paulo (EESC - USP). Website: www.prod.eesc.usp.br

Área de Concentração: Economia e Finanças Corporativas

Interesse: Gestão Econômica

Alexandre Sartoris Neto, Universidade Estadual Paulista júlio de Mesquita Filho - UNESP

Departamento de Economia, Campus Araraquara.

Daisy Aparecida do Nascimento Rebelatto, Universidade de São Paulo - USP

Departamento de Engenharia de Produção, Escola de engenharia de São Carlos.

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Published

2014-05-15

How to Cite

Moralles, H. F., Sartoris Neto, A., & Nascimento Rebelatto, D. A. do. (2014). Normality assumptions and risk management: an application of the parametric var via goodness-of-fit test. Revista Produção Online, 14(2), 430–447. https://doi.org/10.14488/1676-1901.v14i2.1130

Issue

Vol. 14 No. 2 (2014)

Section

Papers

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