Selected GARCH‑type Models in the Metals Market – Backtesting of Value‑at‑Risk

Dominik Krężołek

doi:10.18778/0208-6018.331.12

Authors

Dominik Krężołek University of Economics in Katowice, Faculty of Informatics and Communication, Department of Demography and Economic Statistics

DOI:

https://doi.org/10.18778/0208-6018.331.12

Keywords:

volatility, GARCH‑type models, risk, Value‑at‑Risk, metals market

Abstract

Risk analysis in the financial market requires the correct evaluation of volatility in terms of both prices and asset returns. Disturbances in quality of information, the economic and political situation and investment speculations cause incredible difficulties in accurate forecasting. From the investor’s point of view, the key issue is to minimise the risk of huge losses. This article presents the results of using some selected GARCH‑type models, ARMA‑GARCH and ARMA‑APARCH, in evaluating volatility of asset returns in the metals market. To assess the level of risk, the Value‑at‑Risk measure is used. The comparison between real and estimated losses (in terms of VaR) is made using the backtesting procedure.

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