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Research articles

ScienceAsia 39S (2013): 70-74 |doi: 10.2306/scienceasia1513-1874.2013.39S.070

Confidence intervals for multivariate value at risk

Y.L. Goha,*, A.H. Pooib

ABSTRACT:     Confidence intervals for the γ-quantile of a linear combination of N non-normal variates with a linear dependence structure would be useful to the financial institutions as the intervals enable the accuracy of the value at risk (VaR) of a portfolio of investments to be quantified. Here we construct 100(1−α)% confidence intervals for the γ-quantile using procedures based on bootstrap, normal approximation and hypothesis testing. We show that the method based on hypothesis testing produces a confidence interval which is more satisfactory than those found by using bootstrap or normal approximation.

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a Department of Mathematical and Actuarial Sciences, UTAR Complex. Jalan Genting Kelang, 53300 Setapak, Kuala Lumpur, Malaysia
b Sunway University Business School. No. 5, Jalan Universiti, Bandar Sunway, 46150 Petaling Jaya, Selangor, Malaysia

* Corresponding author, E-mail: gohyl@utar.edu.my

Received 7 Jan 2013, Accepted 5 Apr 2013