I'm conducting a research related to Value at Risk forecasting using volatility models like GARCH and others. My predictions are turning out quite well with some models. Is there a way to capitalize on these predictions? For example, a trading strategy that utilizes VaR prediction as input, so my profitability depends on how accurate my VaR prediction is? Perhaps with options? Thanks!
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2$\begingroup$ Buy a call spread at strike equal to VaR if it's valued at less than your confidence (say 99%). This will get a payout everytime there is a VaR breach, and on average should be profitable. This is though very optimistic. $\endgroup$– ArshdeepCommented May 2 at 18:11
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$\begingroup$ thanks for answering $\endgroup$– finance_broCommented May 3 at 19:05
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$\begingroup$ Sure thing. Please mark it as the answer, I have formally answered it. $\endgroup$– ArshdeepCommented May 3 at 20:05
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1$\begingroup$ done, thanks again! $\endgroup$– finance_broCommented May 5 at 18:35
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Buy a call spread at strike equal to VaR if it's valued at less than your confidence (say 99%). This will get a payout everytime there is a VaR breach, and on average should be profitable. This is though very optimistic.
