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Risk Measurement, Econometrics and Neural Networks: Selected Articles of the 6th Econometric-Workshop in Karlsruhe, Germany PDF

306 Pages·1998·15.3 MB·English
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Risk Measurement, Econometrics and Neural Networks ConuibutionstoEconorrrics Christoph M. Schneider Ulrich Woitek ResearchandDevelopment BusinessCycles Management: 1997.ISBN3-7908-0997-7 From theSovietUnion toRussia 1994. ISBN3-79OS-0757-5 MichaelCarlberg InternationalEconomicGrowth BernhardBohm/LionelloF. Punzo 1997.ISBN3-7908-0995-0 (Eds.) EconomicPerformance Massimo Filippini 1994.ISBN 3-79OS-oS11-3 ElementsoftheSwissMarketfor Electricity LarsOlofPerssonlUlfWiberg 1997.ISBN3-7908-0996-9 MicroregionaJFragmentation 1995.ISBN 3-7908-0855-5 GiuseppeGaburro(Ed.) Ethicsand Economics 1997.ISBN3-7908-0986-1 Emesto FellilFurioC. Rosati! GiovanniTria(Eds.) FrankHosterlHeinzWelsch! TheServiceSector: Christoph Bohringer Productivity and Growth CO AbatementandEconomic 1995. ISBN 3-7908-o875-X 2 StructuralChangeintheEuropean InternalMarket Giuseppe Munda 1997.ISBN3-7908-1020-7 MulticriteriaEvaluation inFuzzyEnvironment Christian M. Hafner 1995.ISBN 3-7908-o892-X NonlinearTimeSeriesAnalysis with ApplicatioustoForeign Giovanni Galizzil ExchangeRateVolatility Luciano Venturini (Eds.) 1997.ISBN3-7908-1041-X EconomicsofInnovation: TheCaseofFoodIndustry SardarM.N. Islam 1996.ISBN3-7908-0911-X MathematicalEconomicsof Multi-LevelOptimisation DavidT. Johnson 1998.ISBN3-7908-1050-9 Poverty,InequalityandSocial WelfareinAustralia Sven-Morten Mentzel 1996.ISBN 3-7908-0942-X Real ExchangeRateMovements 1998.ISBN3-7908-1081-9 Rongxing Guo Border-RegionalEconomics LeiDelsenlEelkedeJong (Eds.) 1996.ISBN 3-7908-0943-8 TheGermanandDutchEconomies 1998.ISBN3-7908-1064-9 OliverFratzscher MarkWeder ThePoUticalEconomyofTrade BusinessCycleModels with Integration Indeterminacy 1996.ISBN 3-7908-0945-4 1998.ISBN3-7908-1078-9 Ulrich Landwehr TorRliSdseth(Ed.) IndustrialMobilityandPublicPolicy Modelsfor MultispedesManage 1996.ISBN 3-7908-0949-7 ment 1998.ISBN3-7908-1001-0 ArnoldPicotJEkkehardSchlicht(Eds.) Firms,Markets,and Contracts MichaelCarlberg L996.Corr. 2ndprinting 1997. IntertemporalMacroeconomics ISBN3-7908-0947-0 1998.ISBN3-7908-1096-7 ThorstenWiclunann SabineSpangenberg AgriculturalTechnicalProgressand TheInstitutionalisedTransforma or theDevelopment aDualEconomy tionoftheEastGermanEconomy 1997.ISBN 3-7908-0960-8 1998.ISBN3-7908-1103-3 continuedonpage307 Georg Bol, Gholamreza Nakhaeizadeh, Karl-Heinz Vollmer (Eds.) Risk Measurement, Econometrics and Neural Networks Selected Articles of the 6th Econometric-Workshop in Karlsruhe, Germany With Contributions of K. Abberger, Y. Feng, S. Heiler; J. Baetge, C. Uthoff; C. Breitner; W. Hardle, S. Sperlich; W. HoIt, P. Refenes; R. Kruse, S. Siekmann, R. Neuneier, H. Zimmennann; T. Severin, W. Schmid; M. Steiner, S. Schneider, J. Wolf; R. Mattbes, M. SchrOder; T. Ridder; R. Dave, G. Stahl; S. Huschens; H. Schulte-Mattler; T. Wilson With 115 Figures and 28 Tables Springer-Verlag Berlin Heidelberg GmbH Series Editors Werner A. Miiller Martina Bihn Editors Prof. Dr. Georg Bol Universităt Karlsruhe Institut fUr Statistik und Mathematische Wutschaftstheorie Neuer Zirkel 3 0-76128 Karlsruhe, Germany Prof. Dr. Gholamreza Nakhaeizadeh Oaimler Benz AG Postfach 2360 0-89013 Ulm, Gennany Prof. Dr. Karl-Heinz VoIImer Sudwestdeutsche Genossenschaftszentralbank AG KarI-Friedrich-Stra.Be 23 0-76049 Karlsruhe, Germany ISBN 978-3-7908-1152-0 CataJoging-in-Publicalion Data applied for Die Deutsche Bibliothek - CIP-EinhcitsaufDahme Risk measU1'eJllent, economebics and neuraI lICIWorks: sclecu:d artieles of the 6th Economc bie Worksbop in Karlsruhc, Germany; with 28 tables / 0c0Ig Bol ... (ed.). Wtth conbibu tions of K. Abberger ... - Hcidclbclg; New York: Physica-Verl., 1998 (Conbibutions to cconomics) ISBN 978-3-7908-1152-0 ISBN 978-3-642-58272-1 (eBook) DOI 10.1007/978-3-642-58272-1 1bis work is subject to copyright, AII rights arc reserved, whether the wbolc or pari of thc material is concemed, specifically thc rights of Ir1Inslation, rqninting, reusc of illastralions, recitalion, broadcasting, reprodudion on microfilm or in any other way, and storagc in dara banks. Duplicali.on of this publicali.on or parts them>f is permitted only under thc provisions of thc German Copyright Law of Scptember 9, 1965, in its currcnt version, and pcrmission fOI' usc mast always bc obtaincd from Physica-VcrIag. Violations arc liable for prosecution under the German Copyrigbt Law. el Springer-Verlag Berlin Heidelberg 1998 Originally published by Physica-Verlag Heidelberg New York in 1998 1bc usc of general descriptive namcs, rcgistered names, trademarks, elC. in this publicalion does not imply, cvcn in thc abscncc of a spcc;ific: statement, !bat such names arc cxcmpt from thc relevant protective laws and regulatioas and thcrcforc frec for general usc. Softc:ovcr Design: Eric:h Kirchncr, Hcidelberg SPIN 10691405 8812202-5 4 3 2 1 0-Printed on acid-frec paper Preface th th th On March 19 - 21 1997, the 6 Econometric Workshop in Karlsruhe, Germany took place at the University ofKarlsruhe. The workshop was orga nized jointly from the Institute for Statistics and Mathematical Economics and the Siidwestdeutsche Genossenschaftszentralbank AG (SGZ-Bank AG). Followingthe tradition ofthe Econometric Workshops in Karlsruhe, the oretical as well asempiricalcontributions in the fields oftimeseries analysis, machine learning and econometrics were presented in the first part. In addi tion- due to the actuality ofthe topic- the articles ofthe second part discuss concepts on Value-at-Risk (VaR). Klaus Abberger, Yuanhua Feng, and Siegfried Heiler discuss two partic ular aspects ofnonparametric time series analysis. As can be observed from stock market returns, the upper and lower quantiles behave differently, indi cating an asymmetrical underlying distribution. To account for this behavior the authors estimate the quantiles of a conditional distribution with kernel methods and give an application to daily series ofGerman stock returns. In the second part oftheir paper, the authors use locally weighted regres sionwith polynomialsand trigonometricfunctions todecompose a timeseries into unobserved components. Bandwidth and polynomialdegree is estimated using a mean averaged squared error criterion with a bootstrap variance esti mator. An applicationto the quarterly GDPseriesdemonstrates the behavior ofthe proposed method. A central technical problem not only in risk management but also in decision making in general is the retrieval of essential information. Today, data-base management systems are used for day-to-day operation and con trol purposes. However, to obtain an integrated view on all business-relevant data a data-warehouse has to be designed. Christoph Breitner discusses the necessary requirements and concepts of data-warehouses as well as the re trieval ofdata using online analytical processing (OLAP). Debtor analysis using neural nets is studied in the article ofJorg Baetge and Carsten Uthoff. In their study the authors examine financial and non financial indicators and model a classifier based on neural nets. In their ap proach feature selection and data preprocessing is emphasized as vital stages in their modeling. In their empirical investigation the performance of clas sifiers based on neural nets is compared with traditional methods based on balance sheet analysis. Wolfgang HardIe and Stefan Sperlich introduce an interactive statistical computingenvironment, which offers modules such as time series analysis or finance-related topics such as option price evaluation. Based on short exam ples they show main features ofthe software package which can be accessed via internet. VI Diagnostic testing in neural network models is the topic ofWilliamHolt and Paul Refenes. They propose a generalisation ofthe Durbin-Watson test for neural network regression models to detect the presence of first order correlation. Thedistributionofthe statistic isestimatedusingapproximation and exact methods. Rudolf Kruse et al. show an application ofneura-fuzzy methods in fore castingfinancialtimeseries. Neura-fuzzy methodscombinepropertiesoffuzzy systems (transparency through the use ofrules) and neural nets (adaptation and nonlinear modeling). In their case study the authors use a neura-fuzzy modelto predict daily returns ofthe Germanstock index. They compare the results ofthe neura-fuzzy model with linear and nonlinear models (i.e. neural nets) and report promising results. Thomas Severin and WolfgangSchmid use methods ofstatistical process control to detect structural changes in financial time series. Assuming that financial timeseries issubject to a GARCH-model,they applyseveral control schemes such as Shewart, EWMA, and CUSUM. The authors propose some new residual charts for GARCH-models. In two case studies the properties ofthese charts applied on German companies' stocks are compared. Manfred Steiner, Sebastian Schneider, and Benedict Wolf examine the managerialand the peckingorderhypothesis. Incontrary tothe peckingorder hypothesis, the managerial hypothesis predicts the preference ofinternal to externalfinancing ifthe manager'sutilityfunction diverges from the owners', to avoid additional monitoring. In the empirical analysis the authors apply discriminant analysis and several forms of neural networks to analyze the financial behavior ofGerman corporations. Rakhal Dave and Gerhard Stahl present an empirical study of several candidate models for forecasting losses in relation to positions held against individualrisk factors as well as losses in relation to a portfolioofrisk factors. Based on eight major currencies and the prices for gold and silver denomi nated in US-Dollar the behavior of various VaR-models are tested. In their article various measures for evaluating model performance are discussed. Fi nally, the authors propose a testing framework for models. The admissionofin-house modelsfor estimatingthe Value-at-Risk (VAR) leads to a variety ofpropositions used in the bankingsector. Stefan Huschens discusses the accuracy of Value-at-Risk estimators. From a statistical point ofview VaRis a statistical point estimation ofan unknown parameter ofthe loss distribution. The author takes sampling errors into consideration and derives exact and asymptotic confidence intervals in a parametric context with linear portfolio and normaldistributed returns. Volatility may not be an appropriate measure for risk especially when we look at a portfolio which contains options. Rainer Matthes and Michael Schroder discuss the shortfall concept as an alternative for measuring risk. Their articlegives a survey ofthe majorcharacteristics ofshortfall measures. In the second part the authors describe an investment strategy based on a VII dynamic benchmark adjustment process. In an example based on a portfolio ofGerman assets the behavior ofthe proposed method is demonstrated. Quantifying risk exposure led to a revival of interest in standard tech niques in statistical quantile estimation. Thomas Ridder gives a survey of parametric and nonparametric approache;, to analyze risk exposure by VaR and studies basic statistical properties of various VaR-estimators. In a case study using a foreign exchange rate the accuracy ofthose VaR-strategies are examined. Hermann Schulte-Mattler provides a detailed overview of the changing structure ofcapital requirementsfor credit and market risk over the past two decades and gives an account of the historical development of the regular ity framework for German credit institutions. Finally, the author discusses the requirements of internal risk models and the backtesting procedure to evaluate the accuracy ofVaR. Thomas Wilson examines risk from credit exposure at a portfolio level. The proposed model estimates the expected losses of a portfolio of credit exposures bymodelingthe marginaland absolutelossdistributionconditional on the current state ofthe economy. The model consists oftwo components. The first is a multi-factor, systematic risk model for credit risk uncertainty. Thesecond is a methodfor explicitlytabulating thediscrete loss distributions arising from a portfolio ofcredit exposures. Many people have contributed to the success ofthe workshop. Matthias Behnke, Tae Horn Hann, Robert Lechler, Xun Lin, Franc;oise Mouden, Petra Wethproved indispensablefor the organizationoftheworkshop. JuliaBranke helped with the layoutofthe bookthroughseveral revisions. Her helpis much appreciated. We wish to thank the faculty, the managingdirector Dr. Volker Binder and the Dean, Prof. Dr. Waldmann for their cooperation. Finally, we thank Daimler-Benz AG and SGZ-Bank AG for their sponsorship ofthe workshop. Karlsruhe, May 1998 Georg Bol Gholamreza Nakhaeizadeh Karl-Heinz Vollmer Table of Contents Nonparametric Smoothing and Quantile Estimation in Time Series. ... 1 Klaus Abberyer, Yuanhua Feng, Siegfried Heiler Development of a Credit-Standing-Indicator for Companies Based on FinancialStatements and Business Informationwith Backpropagation- Networks 17 lory Baetge, Carsten Uthoff DataWarehousingand OLAP: DeliveringJust-In-TimeInformationfor Decision Support 39 Christoph A. Breitner Financial Calculations on the Net 53 Wolfgang Hardie, Stefan Sperlich The Durbin-Watson Test for Neural Regression Models .. ............ 57 William Holt, Paul Refenes Neuro-Fuzzy Methods in Finance Applied to the German Stock Index DAX 69 RudolfKruse, Stefan Siekmann, Ralph Neuneier, Hans Georg Zimmermann Statistical Process Control and its Application in Finance. ........... 83 Thomas Severin, Wolfgang Schmid An Analysis ofthe Financing Behavior ofGerman Stock Corporations Using Artificial Neural Networks 105 Manfred Steiner, Sebastian Schneider, l. Benedict Wolf Portfolio Analysis Based on the Shortfall Concept 147 Rainer Matthes, Michael Schroder Basics ofStatistical VaR-Estimation 161 Thomas Ridder On the Accuracy ofVaR Estimates Based on the Variance-Covariance Approach 189 Rakhal D. Dave, Gerhard Stahl Confidence Intervals for the Value-at-Risk 233 Stefan Huschens x Regulatory Framework for the Risk Management of German Credit Institutions 245 Hermann Schulte-MaUler Measuring and Managing Credit Portfolio Risk 259 Thomas C. Wilson List of Contributors Dr. Klaus Abberger University ofKonstanz Prof. Dr. Dr. h. c. Jarg Baetge Westfalische Wilhelms-Universitat, Munster Christoph A. Breitner Universitat Karlsruhe Rakhal D. Dave (PhD) Olsen & Associates Research Institute for Applied Economics Yuanhua Feng University ofKonstanz Prof. Dr. Wolfgang HardIe Humboldt-Universitat zu Berlin Prof. Dr. Siegfried Heiler University ofKonstanz Prof. Dr. Stefan Huschens TU Dresden WilliamT. Holt London Business School Prof. Dr. RudolfKruse Otto-von-Guericke University, Magdeburg Dr. Rainer Matthes Metzler Asset Management Ralph Neuneier Siemens AG, Munchen Prof. Apostolo-Paul N. Refenes London Business School Dr. Thomas Ridder SGZ-Bank AG, Frankfurt Prof. Dr. Wolfgang Schmid Europe-University Viadrina, Frankfurt (Oder) Sebastian Schneider University ofAugsburg Dr. Michael Schader Zentrum fur Europaische Wirschaftsforschung (ZEW) Prof. Dr. Hermann Schulte-Mattler Fachhochschule Dortmund Thomas Severin Europe-University Viadrina Stefan Siekmann Siemens AG, Munchen Stefan Sperlich Humboldt-Universitat zu Berlin Gerhard Stahl Federal Banking Supervisory Office, Berlin Prof. Dr. Manfred Steiner University ofAugsburg Dr. Carsten Uthoff Westfalische Wilhelms-Universitat, Munster Dr. Thomas C. Wilson (PhD) McKinsey & Company, Zurich J. Benedict Wolf University ofAugsburg Dr. Hans Georg Zimmermann Siemens AG, Munchen

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This book comprises the articles of the 6th Econometric Workshop in Karlsruhe, Germany. In the first part approaches from traditional econometrics and innovative methods from machine learning such as neural nets are applied to financial issues. Neural Networks are successfully applied to different a
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