In this note it is argued that the estimation error in Value-at-Risk predictors gives rise to underestimation of portfolio risk. We propose a simple correction and end in an empirical illustration that it is economically relevant

It is well known that volatility is time-varying and clustered. However, few studies have explored the information content of volatility clustering and its implications for investors’ risk aversion. This information is particularly important in turbulent periods, such as financial crisis. We...

We present a simple new methodology to allow for time-variation in volatilities using a recursive updating scheme similar to the familiar RiskMetrics approach. It exploits the link between exponentially weighted moving average and integrated dynamics of score driven time varying parameter...