Estimation of value at risk and conditional value at risk using normal mixture distributions model

Zetty Ain Kamaruzzaman, Zaidi Isa

Research output: Chapter in Book/Report/Conference proceedingConference contribution

2 Citations (Scopus)

Abstract

Normal mixture distributions model has been successfully applied in financial time series analysis. In this paper, we estimate the return distribution, value at risk (VaR) and conditional value at risk (CVaR) for monthly and weekly rates of returns for FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBMKLCI) from July 1990 until July 2010 using the two component univariate normal mixture distributions model. First, we present the application of normal mixture distributions model in empirical finance where we fit our real data. Second, we present the application of normal mixture distributions model in risk analysis where we apply the normal mixture distributions model to evaluate the value at risk (VaR) and conditional value at risk (CVaR) with model validation for both risk measures. The empirical results provide evidence that using the two components normal mixture distributions model can fit the data well and can perform better in estimating value at risk (VaR) and conditional value at risk (CVaR) where it can capture the stylized facts of non-normality and leptokurtosis in returns distribution.

Original languageEnglish
Title of host publicationAIP Conference Proceedings
Pages1123-1131
Number of pages9
Volume1522
DOIs
Publication statusPublished - 2013
Event20th National Symposium on Mathematical Sciences - Research in Mathematical Sciences: A Catalyst for Creativity and Innovation, SKSM 2012 - Putrajaya
Duration: 18 Dec 201220 Dec 2012

Other

Other20th National Symposium on Mathematical Sciences - Research in Mathematical Sciences: A Catalyst for Creativity and Innovation, SKSM 2012
CityPutrajaya
Period18/12/1220/12/12

Fingerprint

finance
Malaysia
time series analysis
estimating
composite materials
estimates

Keywords

  • Conditional value at risk
  • Normal mixture distributions model
  • Value at risk

ASJC Scopus subject areas

  • Physics and Astronomy(all)

Cite this

Estimation of value at risk and conditional value at risk using normal mixture distributions model. / Kamaruzzaman, Zetty Ain; Isa, Zaidi.

AIP Conference Proceedings. Vol. 1522 2013. p. 1123-1131.

Research output: Chapter in Book/Report/Conference proceedingConference contribution

Kamaruzzaman, ZA & Isa, Z 2013, Estimation of value at risk and conditional value at risk using normal mixture distributions model. in AIP Conference Proceedings. vol. 1522, pp. 1123-1131, 20th National Symposium on Mathematical Sciences - Research in Mathematical Sciences: A Catalyst for Creativity and Innovation, SKSM 2012, Putrajaya, 18/12/12. https://doi.org/10.1063/1.4801257
Kamaruzzaman, Zetty Ain ; Isa, Zaidi. / Estimation of value at risk and conditional value at risk using normal mixture distributions model. AIP Conference Proceedings. Vol. 1522 2013. pp. 1123-1131
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