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Author Barone-Adesi, Giovanni ♦ Giannopoulos, Kostas ♦ Vosper, Les
Source CiteSeerX
Content type Text
File Format PDF
Subject Domain (in DDC) Computer science, information & general works ♦ Data processing & computer science
Abstract Filtered historical simulation provides the general framework to our backtests of portfolios of derivative securities held by a large sample of financial institutions. We allow for stochastic volatility and exchange rates. Correlations are preserved implicitly by our simulation procedure. Options are repriced at each node. Overall results support the adequacy of our framework, but our VaR numbers are too high for swap portfolios at long horizons and too low for options and futures portfolios at short horizons. 1 Filtered Historical Simulation We backtest a large sample of LIFFE derivative portfolios held by financial institutions. Our backtests are based on a new generation of VaR models, filtered historical simulation (FHS). FHS overcomes some shortcomings of the traditional bootstrapping approach. Historical simulation (bootstrapping) consists of generating scenarios, based on historical price changes, for all the variables in the portfolio. Since the estimated VaR is based on the empirical distribution
Educational Role Student ♦ Teacher
Age Range above 22 year
Educational Use Research
Education Level UG and PG ♦ Career/Technical Study
Publisher Date 2000-01-01