Assessing the accuracy of risk models in the Malaysian market

Zatul Karamah Ahmad Baharul-Ulum, and Ismail Ahmad, and Norhana binti Salamudin, (2012) Assessing the accuracy of risk models in the Malaysian market. Asian Journal of Business and Management Sciences, 1 (7). pp. 48-59. ISSN 2047-2528


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This paper presents Value-at-Risk (VaR) models that are integrated with several volatility representations to estimate the market risk for the Malaysian non-financial sectors data. The models are used to obtain daily volatility forecasts and these volatilities are used to estimate the Value-at-Risk (VaR) for each sector based on the Monte Carlo Simulation (MCS) approach. In a sample over the years from 1993 until 2010 for three non-financial sectors sample namely Industrial Product (INP), Property (PRP) and Trade and Services (TAS) sectors, the expected maximum losses were quantified at 95% confidence level. Several accuracy tests namely the Kupiec, Christoffersen and Lopez tests are conducted to complement the estimates. The final results provide evidence that consideration of fat-tails and asymmetries are crucial issues when deciding to estimate VaR in managing financial risk.

Item Type:Article
Uncontrolled Keywords:Value-at-Risk, volatility modelling, accuracy test
Subjects:H Social Sciences > HB Economic Theory
ID Code:7287
Deposited By:IR Admin
Deposited On:21 Oct 2013 13:28
Last Modified:18 Feb 2015 10:58

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