UV garch model forecasts

Discussions of ARCH, GARCH, and related models
TomDoan
Posts: 7536
Joined: Wed Nov 01, 2006 4:36 pm

Re: UV garch model forecasts

Unread post by TomDoan »

ac_1 wrote:
TomDoan wrote:With p=.01, the Poisson approximation to the binomial is MUCH better than the Normal. You can also do an exact calculation using the %BETAINC (incomplete beta) function:
compute p=.01,n=250
do i=0,10
   ?i %poisson(n*p,i) %betainc(1-p,n-i,i+1)
end do i
though there is no practical difference between the Poisson approximation and the exact calculation.
Thanks - Yes, it's a one liner:

report(atrow=5,atcol=6,fillby=cols) %if(ntrigger_1>=10.0,"Red",%if(ntrigger_1<=4.0,"Green","Yellow"))

How to proceed with the ES Traffic Light?
Your 10 and 4 are specific to a particular combination of N and alpha. Why would you restricted yourself that way?

The "ES Traffic Light" is (a) not really about the ES and (b) looks like gibberish (mainly because of (a)). What they are analyzing is not the "expected shortfall" (which would be a $ amount) but the observed percentile. If the distribution is thin-tailed, a loss of 10% over the VaR might give you a .50 value, while in a thick-tailed distribution, a loss of 50% over the VaR might give you a .25 value.
ac_1
Posts: 358
Joined: Thu Apr 15, 2010 6:30 am
Location: London, UK

Re: UV garch model forecasts

Unread post by ac_1 »

TomDoan wrote:
ac_1 wrote:
TomDoan wrote:With p=.01, the Poisson approximation to the binomial is MUCH better than the Normal. You can also do an exact calculation using the %BETAINC (incomplete beta) function:
compute p=.01,n=250
do i=0,10
   ?i %poisson(n*p,i) %betainc(1-p,n-i,i+1)
end do i
though there is no practical difference between the Poisson approximation and the exact calculation.
Thanks - Yes, it's a one liner:

report(atrow=5,atcol=6,fillby=cols) %if(ntrigger_1>=10.0,"Red",%if(ntrigger_1<=4.0,"Green","Yellow"))

How to proceed with the ES Traffic Light?
Your 10 and 4 are specific to a particular combination of N and alpha. Why would you restricted yourself that way?

The "ES Traffic Light" is (a) not really about the ES and (b) looks like gibberish (mainly because of (a)). What they are analyzing is not the "expected shortfall" (which would be a $ amount) but the observed percentile. If the distribution is thin-tailed, a loss of 10% over the VaR might give you a .50 value, while in a thick-tailed distribution, a loss of 50% over the VaR might give you a .25 value.
Yes, I am using a different size window than N=250.
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