Estimation of Value-at-Risk (VaR) through Filtered Historical Simulation (FHS) and Analysis of Risk Spillover in Tehran Stock Exchange (TSE): Evidence from the Groups of Chemical Products and Banks & Credit Institutions

This paper aimed at investigating the risk spillover mechanism between the groups of chemical products and banks & credit institutions with the passage of time and compare it with the volatility spillover mechanism between them. For this purpose, we used the daily data from March 2009 to February 2021. Also, we used the Filtered Historical Simulation (FHS) method for estimating Value-at-Risk (VaR) and the Granger causality test for risk spillover existence. Our results showed a bilateral spillover between the two groups for Lags 1 and 2. Also, for Lags 3 to 5, there was a unilateral spillover from the group of chemical products to the group of banks & credit institutions, the opposite of which was not significant. However, investigation of volatility spillover between these two groups revealed absolute stable unilateral spillover from the group of chemical products to that of the banks & credit institutions. The investigated groups in the risk spillover field and the VaR estimation method distinguished this paper from other studies.