Estimation of value at risk in currency exchange rate portfolio using asymmetric GJR-GARCH Copula

In this study, we discuss the problem in measuring the risk in a portfolio based on value at risk (VaR) using asymmetric GJR-GARCH Copula. The approach based on the consideration that the assumption of normality over time for the return can not be fulfilled, and there is non-linear correlation for dependent model structure among the variables that lead to the estimated VaR be inaccurate. Moreover, the leverage effect also causes the asymmetric effect of dynamic variance and shows the weakness of the GARCH models due to its symmetrical effect on conditional variance. Asymmetric GJR-GARCH models are used to filter the margins while the Copulas are used to link them together into a multivariate distribution. Then, we use copulas to construct flexible multivariate distributions with different marginal and dependence structure, which is led to portfolio joint distribution does not depend on the assumptions of normality and linear correlation. VaR obtained by the analysis with confidence level 95% is 0.005586. ...