Estimating the VAR (Value-at-Risk) of Brazilian Stock Portfolios via GARCH Family Models and via Monte Carlo Simulation

Comparison of VaR Models to the Brazilian Stock Market Under the Hypothesis of Serial Independence in Higher Orders: Are Garch Models Really Indispensable?

“…The literature on VaR has focused on the comparison between different methods for its calculation, taking, as reference for the comparisons, the results obtained by the application of tests of adherence and independence of the observed violations. Some examples are found in the studies by Tolikas (2008), Ferreira (2013, Godeiro (2014), among others.…”

“…Another application of VaR in the Brazilian context can be found in Godeiro (2014), which calculates the VaR of three distinct portfolios through models of the GARCH(m,n) family, with innovations following normal and Student's t distributions, and by means of Monte Carlo simulations. Each portfolio consists of five shares traded on the São Paulo Stock Exchange (B3).…”

“…However, this same literature has failed to point out certain models as suitable without making use of backtesting to verify if there is independence of violations of orders higher than 1. Some international examples are Berkowitz and O'Brien (2001), Bali (2003), Tolikas (2008), and more recently in Brazil, Godeiro (2014).…”