This paper studies the efficiency of an econometric model where the
volatility is modeled by a GARCH (1,1) process, and the innovations follow a
standardized form of the Pearson type-IV distribution. The performance of the
model is examined by in sample and out of sample testing, and the accuracy is
explored by a variety of Value-at-Risk methods, the success/failure ratio,
the Kupiec-LR test, the independence and conditional coverage tests of
Christoffersen, the expected shortfall measures, and the dynamic quantile
test of Engle and Manganelli. Overall, the proposed model is a valid and
accurate model performing better than the skewed Student-t distribution,
providing the financial analyst with a good candidate as an alternative
distributional scheme.
Value-at-Risk and Backtesting with the Aparch Model and the Standardized Pearson Type IV Distribution