Conditional Tail Behavior and Value at Risk

In this paper we study the tail behaviour of eight major market indexes stratifying data according to the violation of a high threshold on the previous day. The distributional differences found can be exploited for improving VaR calculations in several settings, giving rise to what we call 'MCVaR'. We compare the performance of MCVaR with unconditioned counterparts and with a Garch VaR with several backtesting techniques that take into account not only the number of the violations but also their magnitude and clustering.