a) will a leptokurtic distribution report a higher or Lower VaR?
b) Will a negative skewness distribution report a higher or lower VaR?
Notes said: With a Leptokurtic (fat tails) distribution, VaR will underestimate the loss and its associated probability.
Shouldnt it be overestimated? Since a Leptokurtic distibution tends to be have a lower standard deviation, thus VaR based on standard nommal distribution will be farther out in the tail. Shouldnt this be over estimated loss? Since VaR is an absolute value of loss?
Anyone can help explain this?
Studying With
this has been discussed please do a search
I can only find the post with respect to negative skewness.
Shouldnt Leptokuitic be different, since it assumes a narrower range? Thus, a lower prob of extreme loss??/
I agreed with what Ny said Yet I get more confused after seeing the graphs.
Guess my question is: Is leptokurtsis= higher/lower probability of extreme cases?
-ve skewness & high kurtosis - underestimates volatiltiy & overestimates return
b) Will a negative skewness distribution report a higher or lower VaR?
eq is -VAR = Rp - Z x Std dev…..Rp is overstimated —> so VAR would be lower—->Std dev is underestimated— VAR would be higher
RS