Value-at-Risk for South-East Asian Stock Markets: Stochastic Volatility vs. GARCH

Paul Bui Quang, Tony Klein, Nam H. Nguyen, Thomas Walther

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This study compares the performance of several methods to calculate the Value-at-Risk of the six main ASEAN stock markets. We use filtered historical simulations, GARCH models, and stochastic volatility models. The out-of-sample performance is analyzed by various backtesting procedures. We find that simpler models fail to produce sufficient Value-at-Risk forecasts, which
appears to stem from several econometric properties of the return distributions. With stochastic volatility models, we obtain better Value-at-Risk forecasts compared to GARCH. The quality varies over forecasting horizons and across markets. This indicates that, despite a regional proximity and homogeneity of the markets, index volatilities are driven by different factors.
Original languageEnglish
Pages (from-to)1-19
JournalJournal of Risk and Financial Management
Issue number2
Publication statusPublished - 05 Apr 2018


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