Multifractal Value at Risk model

• Multifractal Value at Risk (MFVaR) is developed in consideration of the multifractal property of financial time series.
• MFVaR is a parametric model and not based on simulation.
• MFVaR can provide a stable and accurate forecasting performance in volatile financial market where large loss can be incurred.

In this paper new Value at Risk (VaR) model is proposed and investigated. We consider the multifractal property of financial time series and develop a multifractal Value at Risk (MFVaR). MFVaR introduced in this paper is analytically tractable and not based on simulation. Empirical study showed that MFVaR can provide the more stable and accurate forecasting performance in volatile financial markets where large loss can be incurred. This implies that our multifractal VaR works well for the risk measurement of extreme credit events.