Non parametric VaR Techniques. Myths and Realities

VaR (value‐at‐risk) estimates are currently based on two main techniques: the variance‐covariance approach or simulation. Statistical and computational problems affect the reliability of these techniques. We illustrate a new technique – filtered historical simulation (FHS) – designed to remedy some of the shortcomings of the simulation approach. We compare the estimates it produces with traditional bootstrapping estimates. (J.E.L.: G19).