A GARCH MODEL APPROACH TO CALCULATE THE VALUE AT RISK OF ALBANIAN LEK EXCHANGE RATE

Authors

  • Gentjan Cera Faculty of Economics and Agribusiness, Agricultural University of Tirana
  • Edmond Cera Faculty of Economics and Agribusiness, Agricultural University of Tirana
  • Gerdi Lito Faculty of Economics, University of Tirana, Albania

DOI:

https://doi.org/10.19044/esj.2013.v9n25p%25p

Abstract

The exchange rate regime applied in Albania is a flexible one, as a result it directly brings the exposure to exchange rate risk. Value at Risk (VaR) is one of the known measures of this type of risk. The measurement of VaR for the EUR/ALL exchange rate is the aim of this paper. Taking into the consideration that Albania has its trade activity mainly with countries that are part of Eurozone and that Euro is actually the main reserve value tool, we are focused only in this currency. The GARCH model is used as the approach to measure VaR, as in our opinion, it is the most appropriate for this problem. The results confirm the stability of the model and it being appropriate. This paper is an original attempt to use this method for the calculation of VaR for the EUR/ALL exchange rate.

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Published

2013-09-30

How to Cite

Cera, G., Cera, E., & Lito, G. (2013). A GARCH MODEL APPROACH TO CALCULATE THE VALUE AT RISK OF ALBANIAN LEK EXCHANGE RATE. European Scientific Journal, ESJ, 9(25). https://doi.org/10.19044/esj.2013.v9n25p%p

Issue

Vol. 9 No. 25 (2013): ESJ September Edition

Section

Articles

License

This work is licensed under a Creative Commons Attribution 4.0 International License.