Validating Risk Estimation Models in Russian Market

Student: Gishvarov Rafael

Supervisor: Victor A Lapshin

Educational Programme: Economics (Bachelor)

Year of Graduation: 2018

In this paper, a comparison of the VaR and ES estimates is made, including principle validity, using stock returns from the Russian stock market, with a depth of about 1 year (252 trading days). Three popular methods for calculating VaR and CVaR (parametric, historical simulation and Monte-Carlo), their features and methods for backtesting are considered. The question of the expediency of using a one-day VaR(1%) and switching to ES(2,5%) was also discussed. In the framework of backtesting, using the Unconditional Coverage criteria (Kupiec’s test) and Independence Hypothesis criteria (Christoffersen’s Independence test) the model of historical modeling at all significance levels has shown itself best. Obtained results can be used both in further studies on this issue, and in practice when it is necessary to assess market risk.

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