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BUSINESS AND ECONOMICS RESEARCH JOURNAL

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Article Information
Journal: Business and Economics Research Journal
Title of Article: Comparison of Value at Risk Calculation Models in Terms of Banks’ Capital Adequacy Ratio
Author(s): Ahmet Bostancı, Turhan Korkmaz
Volume: 5
Number: 3
Year: 2014
Page: 15-41
ISSN: 1309-2448
Abstract
Banks using advanced VaR models are expected to hold in a lower amount subject to market risk (ASMR) than banks using simple VaR models because of measuring their risk relatively more accurately. The purpose of this study is to test the hypothesis that advanced VaR models which measures risks better are resulting a lower ASMR. In this study historical volatility, historical simulation, EWMA, GARCH (1,1), GARCH (1,1)-Bootstrap and GARCH (1,1)-GED models were used for VaR calculations. By backtesting the VaR measures the model security factor h has been identified and so the ASMR has been simulated. After the results have been discussed for the real data sets the same process was repeated with randomly generated six different data sets to test the consistence of the results. According to the findings, the hypothesis that advanced VaR models like GARCH (1,1)-Bootstrap and GARCH (1,1)-GED provides a lower ASMR was rejected.
Keywords: Basel II, backtesting, value-at-risk, capital adequacy ratio, amaount subject to market risk
JEL Classification: G17, G21, G32, G38

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