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A multivariate FGD technique to improve VaR computation in equity markets

Audrino, Francesco ; Barone-Adesi, Giovanni

In: Computational management science, 2005, vol. 2, no. 2, p. 87-106

It is difficult to compute Value-at-Risk (VaR) using multivariate models able to take into account the dependence structure between large numbers of assets and being still computationally feasible. A possible procedure is based on functional gradient descent (FGD) estimation for the volatility matrix in connection with asset historical simulation. Backtest analysis on simulated and real data...