Value-at-risk for the USD/ZAR exchange rate: The variance-gamma model
© University of Pretoria. All rights reserved. A country’s level of exchange risk is closely linked to its financial stability, on a macro-economic scale. South African exchange rates, in particular, have a significant impact on imports, inflation, consumer prices and monetary policies. Consequently...
| Main Authors: | , , |
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| Format: | Journal Article |
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University of Pretoria
2015
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| Online Access: | http://hdl.handle.net/20.500.11937/67035 |
| _version_ | 1848761457823449088 |
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| author | Kemda, L. Huang, Karl Chinhamu, K. |
| author_facet | Kemda, L. Huang, Karl Chinhamu, K. |
| author_sort | Kemda, L. |
| building | Curtin Institutional Repository |
| collection | Online Access |
| description | © University of Pretoria. All rights reserved. A country’s level of exchange risk is closely linked to its financial stability, on a macro-economic scale. South African exchange rates, in particular, have a significant impact on imports, inflation, consumer prices and monetary policies. Consequently, it is imperative for economists and investors to assess accurately the associated exchange risks. Exchange rates, like most financial time series, are leptokurtic and contradict the classical Gaussian assumption. We therefore introduce subclasses of the generalised hyperbolic distribution as alternative models and contrast these with the normal distribution. We conclude that the variance-gamma model is the most robust for describing the log-returns of daily USD/ZAR exchange rates and their related Value-at-Risk (VaR) estimates. The model selection methodologies utilised in our analyses include the robust Kolmogorov-Smirnov test and the Akaike information criterion. Backtesting on the adequacy of VaR estimates is also performed using the Kupiec likelihood ratio test. |
| first_indexed | 2025-11-14T10:31:59Z |
| format | Journal Article |
| id | curtin-20.500.11937-67035 |
| institution | Curtin University Malaysia |
| institution_category | Local University |
| last_indexed | 2025-11-14T10:31:59Z |
| publishDate | 2015 |
| publisher | University of Pretoria |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | curtin-20.500.11937-670352021-08-23T06:39:39Z Value-at-risk for the USD/ZAR exchange rate: The variance-gamma model Kemda, L. Huang, Karl Chinhamu, K. © University of Pretoria. All rights reserved. A country’s level of exchange risk is closely linked to its financial stability, on a macro-economic scale. South African exchange rates, in particular, have a significant impact on imports, inflation, consumer prices and monetary policies. Consequently, it is imperative for economists and investors to assess accurately the associated exchange risks. Exchange rates, like most financial time series, are leptokurtic and contradict the classical Gaussian assumption. We therefore introduce subclasses of the generalised hyperbolic distribution as alternative models and contrast these with the normal distribution. We conclude that the variance-gamma model is the most robust for describing the log-returns of daily USD/ZAR exchange rates and their related Value-at-Risk (VaR) estimates. The model selection methodologies utilised in our analyses include the robust Kolmogorov-Smirnov test and the Akaike information criterion. Backtesting on the adequacy of VaR estimates is also performed using the Kupiec likelihood ratio test. 2015 Journal Article http://hdl.handle.net/20.500.11937/67035 10.17159/2222-3436/2015/v18n4a8 http://creativecommons.org/licenses/by/4.0/ University of Pretoria fulltext |
| spellingShingle | Kemda, L. Huang, Karl Chinhamu, K. Value-at-risk for the USD/ZAR exchange rate: The variance-gamma model |
| title | Value-at-risk for the USD/ZAR exchange rate: The variance-gamma model |
| title_full | Value-at-risk for the USD/ZAR exchange rate: The variance-gamma model |
| title_fullStr | Value-at-risk for the USD/ZAR exchange rate: The variance-gamma model |
| title_full_unstemmed | Value-at-risk for the USD/ZAR exchange rate: The variance-gamma model |
| title_short | Value-at-risk for the USD/ZAR exchange rate: The variance-gamma model |
| title_sort | value-at-risk for the usd/zar exchange rate: the variance-gamma model |
| url | http://hdl.handle.net/20.500.11937/67035 |