Estimating value-at-risk under a Heath––Jarrow––Morton framework with jump

Ze-To, S. 2012. Estimating value-at-risk under a Heath––Jarrow––Morton framework with jump. Applied Economics. 44 (21), pp. 2279-2741. https://doi.org/10.1080/00036846.2011.566198

TitleEstimating value-at-risk under a Heath––Jarrow––Morton framework with jump
TypeJournal article
AuthorsZe-To, S.
Abstract

This article proposes a new methodology for measuring Value-at-Risk (hereafter VaR) using a model that incorporates both volatility and jumps. Heath–Jarrow–Morton (HJM) model has been used for the valuation of interest rate derivatives. This study extends the use of HJM model to the estimation VaR. This article specifically uses a two-factor HJM jump-diffusion model for computation. The study models the Eurodollar futures prices using its derivatives. In addition, this article uses a new volatility specification of Ze-To (2002) to construct the HJM dynamics. The result indicates that the VaR model using HJM jump-diffusion framework performs well in capturing the nonnormality and in providing
accurate VaR forecasts in the in-sample and out-sample tests.

Keywordsvalue-at-risk; interest rate modeling; options pricing; HJM model
JournalApplied Economics
Journal citation44 (21), pp. 2279-2741
ISSN0003-6846
1466-4283
Year2012
PublisherTaylor & Francis
Digital Object Identifier (DOI)https://doi.org/10.1080/00036846.2011.566198
Publication dates
Published17 Jun 2011
Published in print2012

Related outputs

Fundamental Index Aligned and Excess Market Return Predictability
Ze-To, S. 2022. Fundamental Index Aligned and Excess Market Return Predictability. Journal of Forecasting. 41 (3), pp. 592-614. https://doi.org/10.1002/for.2829

Option implied beta and option return
Ze-To, S. 2017. Option implied beta and option return. Applied Economics. 50 (2), pp. 128-142. https://doi.org/1080/00036846.2017.1313958

Asset liquidity and stock returns
Ze-To, S. 2016. Asset liquidity and stock returns. Advances in Accounting. 35, pp. 177-196. https://doi.org/10.1016/j.adiac.2016.08.002

Cross-Section Stock Return and Implied Covariance between Jump and Diffusive Volatility
Ze-To, S. 2015. Cross-Section Stock Return and Implied Covariance between Jump and Diffusive Volatility. Journal of Forecasting. 34 (5), pp. 379-390. https://doi.org/10.1002/for.2348

Correlated implied volatility with jump and cross section of stock returns
Ze-To, S. 2015. Correlated implied volatility with jump and cross section of stock returns. Accounting & Finance. 60 (3), pp. 2007-2037. https://doi.org/10.1111/acfi.12429

Earnings management and accrual anomaly across market states and business cycles
Ze-To, S. 2012. Earnings management and accrual anomaly across market states and business cycles. Advances in Accounting. 28 (2), pp. 344-352. https://doi.org/10.1016/j.adiac.2012.09.011

Expected Stock Returns and Option-Implied Rate of Return
Ze-To, S. 2012. Expected Stock Returns and Option-Implied Rate of Return. Journal of Mathematical Finance. 2 (4), pp. 269-279. https://doi.org/10.4236/jmf.2012.24030

Crisis, Value at Risk and Conditional Extreme Value Theory via the NIG + Jump Model
Ze-To, S. 2012. Crisis, Value at Risk and Conditional Extreme Value Theory via the NIG + Jump Model. Journal of Mathematical Finance. 2 (3), pp. 225-237. https://doi.org/10.4236/jmf.2012.23025

Crisis, Value at Risk, and Conditional Extreme Value Theory via Garch-Jump Model
Ze-To, S. 2010. Crisis, Value at Risk, and Conditional Extreme Value Theory via Garch-Jump Model. Review of Futures Markets. 18 (4), pp. 319-345.

Value at Risk and Conditional Extreme Value Theory via Markov Regime Switching Models
Ze-To, S. 2008. Value at Risk and Conditional Extreme Value Theory via Markov Regime Switching Models. Journal of Futures Markets. 28 (2), pp. 155-181. https://doi.org/10.1002/fut.20293

Pricing and Hedging American Fixed-Income Derivatives with Implied Volatility Structures in the Two-Factor Heath–Jarrow–Morton Model
Ze-To, S. 2002. Pricing and Hedging American Fixed-Income Derivatives with Implied Volatility Structures in the Two-Factor Heath–Jarrow–Morton Model. Journal of Futures Markets. 22 (9), pp. 839-875. https://doi.org/10.1002/fut.10031

Permalink - https://westminsterresearch.westminster.ac.uk/item/w0v2w/estimating-value-at-risk-under-a-heath-jarrow-morton-framework-with-jump


Share this

Usage statistics

34 total views
0 total downloads
These values cover views and downloads from WestminsterResearch and are for the period from September 2nd 2018, when this repository was created.