Value-at-Risk Theory and Practice

The first advanced book on value-at-risk

Chapter 4, Page 174
Exercise 5

Reproduce the results of the example of this section. Use different seed values with Newton’s method to locate both the saddle point and global maximum.

Solution

The results for this exercise are provided already in the text. Your task is to reproduce them independently. Computationally, the most demanding task is implementing Newton's method in order to maximize the log-likelihood function. This can be done in a Microsoft Excel spreadsheet using the solver function. See the linked spreadsheet.

 

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