Decay Factor Optimization in time Weighted Simulation (Using loss Functions Şener and Lopez)

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Nadafi, Maryam | 2013

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Type of Document: M.Sc. Thesis
Language: Farsi
Document No: 46038 (44)
University: Sharif University of Technology
Department: Management and Economics
Advisor(s): Keshavarz Haddad, Gholamreza
Abstract:
Over the last two decade, Value at Risk (VaR) has been used a popular method of market risk measurement, However Financial institutes and financial practitioners intend to improve its sufficiency and accuracy. One to the popular technique of VaR calculation is the times weighted simulation (BRW). When the weights are assigned to each observed return, exponentially decreasing, normally. The more recent returns would have his how weight. In the underlying literature the decay factor are selected on an ad hoc basely.The present research proposes a new method of decay factor determining by and optimization algorithm. By this method the decay factor is determined by minimization of the Sener loss function (2012). We compare accuracy of calculated VaR by the optimal decay factor by Sener and lopez loss functions.Our findings show that the value of decay factor which is obtained the value of decay factor which is obtained by Sener loss function, result in more accurate VaR than that of Lopez function
Keywords:
Value at Risk ; Decay Factor ; Time Weighted Simulation (BRW) ; Sener Loss Function ; Lopez Loss Function

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