Copyright © 2010 Christian Gourieroux and Joann Jasiak. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

Abstract

This paper presents a new nonparametric method for computing the conditional Value-at-Risk, based on a local approximation of the conditional density function in a neighborhood of a predetermined extreme value for univariate and multivariate series of portfolio returns. For illustration, the method is applied to intraday VaR estimation on portfolios of two stocks traded on the Toronto Stock Exchange. The performance of the new VaR computation method is compared to the historical simulation, variance-covariance, and J. P. Morgan methods.