Survey_Mittnik_2013

Abstract

We simulate 10,000 samples of size 1, 000, making iid draws from the joint normal distribution N(0, R). Hence, dependence is fully described by conventional Pearson correlations, which were estimated from monthly returns (January 2002– July 2) of the following stock indices: Dow Jones Industrial Average (DJIA), German DAX, MSCI Brazil, and MSCI Russia. The (rounded) correlation estimates are shown in Table 3. The Monte Carlo results for the 90%, 95%, 99%, and 99.5% VaR–implied tail correlations are summarized in Table 4, reporting the estimators’ bias and MSE. The columns “Int. Viol.” and “PSD Viol.” state the percentage of cases, where the estimated correlation matrix violates interval or the PSD condition, respectively.