Fitting Financial Returns Distributions: A Mixture Normality Approach .

Diego Zappa, Riccardo Bramante

Risultato della ricerca: Contributo in libroChapter

Abstract

Value at Risk has emerged as a useful tool to risk management. A relevant driving force has been the diffusion of JP Morgan RiskMetrics methodology and the subsequent BIS adoption for all trading portfolios of financial institutions. To improve the accuracy of VaR estimates in this paper we propose the use of mixture of truncated normal distributions in modelling returns. An optimization algorithm has been developed to obtain the best fit by using the minimum distance approach. Results show evidence to fit return distributions at a satisfactory level, completely maintaining local normality properties in the model.
Lingua originaleEnglish
Titolo della pubblicazione ospiteMathematical and Statistical Methods for Actuarial Sciences and Finance
Pagine81-88
Numero di pagine8
DOI
Stato di pubblicazionePubblicato - 2014

Keywords

  • Minimum Distance
  • Mixture of truncated distributions
  • Value at risk

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