The Best of Both Worlds: A Hybrid Approach to Calculating Value at Risk

@article{Richardson1997TheBO,
  title={The Best of Both Worlds: A Hybrid Approach to Calculating Value at Risk},
  author={Matthew P. Richardson and Jacob Boudoukh and Robert F. Whitelaw},
  journal={Risk Management},
  year={1997}
}
The hybrid approach combines the two most popular approach to VaR estimation: RiskMetrics and Historical Simulation. It estimates the VaR of a portfolio by applying exponentially declining weights to past returns and then finding the appropriate percentile of this time-weighted empirical distribution. This new approach is very simple to implement. Empirical tests show a significant improvement in the precision of VaR forecasts using the hybrid approach relative to RiskMetrics and Historical… 
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