Statistical Seminars

Title: "Estimating Value-at-Risk with Product Partition Models"

Speaker: Claudia Tarantola, University of Pavia. Σε συνεργασία με τους Bormetti Giacomo, De Giuli M. Elena and Delpini Danilo.

Date: 06 May 2010

Time: 16:00-17:00

Room: 607, 6th floor, Evelpidon building


In this paper we propose a novel Bayesian methodology for Value-at-Risk computation based on parametric Product Partition Models. Value-at-Risk is a standard tool to measure and control the market risk of an asset or a portfolio, and it is also required for regulatory purposes. Its popularity is partly  due to the fact that it is an easily understood measure of risk. The use of Product Partition Models allows us to remain in a Normal setting even in presence of outlying points, and to obtain a closed-form expression for Value-at-Risk computation. We present and compare two different scenarios:  a product partition structure on the  vector of means and a product partition structure  on the vector of variances. We apply our methodology to an Italian stock market data set from Mib30. The numerical results clearly show that Product Partition Models can be successfully exploited in order to quantify market risk exposure. The obtained Value-at-Risk estimates are in full agreement with Maximum Likelihood approaches, but our methodology provides richer information about the clustering structure of the data and the presence of outlying points.

For more details see: Bayesian Analysis of Value-at-Risk with Product Partition Models, arXiv:0809.0241,  accepted for publication in Quantitative Finance.

back to seminars