A Neural Network with Shared Dynamics for Multi-Step Prediction of Value-at-Risk and Volatility

Nalan Bastürk; Peter C. Schotman; Hugo Schyns

doi:10.2139/ssrn.3871096

A Neural Network with Shared Dynamics for Multi-Step Prediction of Value-at-Risk and Volatility

Nalan Bastürk, Peter C. Schotman, Hugo Schyns

Research output: Working paper / Preprint › Working paper

Abstract

We develop a LSTM neural network for the joint prediction of volatility, realized volatility and Value-at-Risk. Regularization by means of pooling the dynamic structure for the different outputs of the models is shown to be a powerful method for improving forecasts and smoothing VaR estimates. The method is applied to daily and high-frequency returns of the S&P500 index over a period of 25 years.

Original language	English
Publisher	SSRN
DOIs	https://doi.org/10.2139/ssrn.3871096
Publication status	Published - 21 Jun 2021

JEL classifications

g17 - Financial Forecasting and Simulation
c32 - "Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models"

Keywords

neural network
value-at-risk
volatility models
equity returns
risk management

Access to Document

10.2139/ssrn.3871096

A Neural Network with Shared Dynamics for Multi-Step Prediction of Value-at-Risk and Volatility
Schyns, H. (Speaker)
23 Jun 2021
Activity: Talk or presentation / Performance / Speeches › Talk or presentation - at conference › Academic

Cite this

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AB - We develop a LSTM neural network for the joint prediction of volatility, realized volatility and Value-at-Risk. Regularization by means of pooling the dynamic structure for the different outputs of the models is shown to be a powerful method for improving forecasts and smoothing VaR estimates. The method is applied to daily and high-frequency returns of the S&P500 index over a period of 25 years.

KW - neural network

KW - value-at-risk

KW - volatility models

KW - equity returns

KW - risk management

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M3 - Working paper

BT - A Neural Network with Shared Dynamics for Multi-Step Prediction of Value-at-Risk and Volatility

PB - SSRN

ER -

A Neural Network with Shared Dynamics for Multi-Step Prediction of Value-at-Risk and Volatility

Abstract

JEL classifications

Keywords

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A Neural Network with Shared Dynamics for Multi-Step Prediction of Value-at-Risk and Volatility

Cite this