Portfolio VaR Computation Based on O-GARCH

The key to compute VaR is the covariance matrix of portfolio. However, in the classical multivariate GARCH model large-scale portfolio is highly parameterized and difficult to estimate in practice. So this paper uses O-GARCH model to calculate covariance matrix of portfolio. Then 12 samples of stocks in A stock market of Shanghai and Shenzhen is examined by this model. Finally, we can compute portfolio VaR, component VaR and marginal VaR by the covariance matrix of stocks portfolio.