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

306 Pages·1998·15.3 MB·English

by  Klaus Abberger

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
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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