A STUDY ON THE DCC-GARCH MODEL’S FORECASTING ABILITY WITH VALUE-AT-RISK APPLICATIONS ON THE SCANDINAVIAN FOREIGN EXCHANGE MARKET

A STUDY ON THE DCC-GARCH MODEL’S FORECASTING ABILITY WITH VALUE-AT-RISK APPLICATIONS ON THE SCANDINAVIAN FOREIGN EXCHANGE MARKET

This thesis has treated the subject of DCC-GARCH model’s forecasting ability and Value-at- Risk applications on the Scandinavian foreign exchange market. The estimated models were based on daily opening foreign exchange spot rates in the period of 2004-2013, which captured the information in the fin...

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Bibliographic Details
Main Authors: Andersson-Säll, Tim, Lindskog, Johan
Format: Others
Language:English
Published: Uppsala universitet, Statistiska institutionen 2019
Subjects:
Multivariate GARCH
Conditional Correlations
Forecasting
Time-varying covariance matrices
Exchange rate returns
Variance-Covariance matrix
Probability Theory and Statistics
Sannolikhetsteori och statistik
Online Access:http://urn.kb.se/resolve?urn=urn:nbn:se:uu:diva-375201
Description
Summary:This thesis has treated the subject of DCC-GARCH model’s forecasting ability and Value-at- Risk applications on the Scandinavian foreign exchange market. The estimated models were based on daily opening foreign exchange spot rates in the period of 2004-2013, which captured the information in the financial crisis of 2008 and Eurozone crisis in the early 2010s. The forecasts were performed on a one-day rolling window in 2014. The results show that the DCC-GARCH model accurately predicted the fluctuation in the conditional correlation, although not with the correct magnitude. Furthermore, the DCC-GARCH model shows good Value-at-Risk forecasting performance for different portfolios containing the Scandinavian currencies.

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