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Is there a way to upgrade R PerformanceAnalytics function VaR with more risk sensitive approaches like EWMA or GARCH? Or is there another R package which can handle the issue?

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  • $\begingroup$ Since R is open-source, you can change the code to meet your needs. You can open the source code for a function using the edit function. After that, doing what you're trying to do might require a fair bit of hacking, but I can't imagine it's impossible. $\endgroup$ – Jacob Amos Sep 16 '14 at 5:17
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    $\begingroup$ @jamos125 Agreed. Moreover, we all lose when someone shies from such enterprise. $\endgroup$ – Drmanifold Sep 17 '14 at 16:17
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You can pass in the parameters are you estimating with EWMA or GARCH using the mu (mean), sigma (co/variance) m3 (co/skewness) and m4(co/kurtosis) arguments.

e.g. blahblah = EWMA(my_time_series)

VaR(my_time_series,mu=blahblah)

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If you want to take the EWMA approach have a look at cov.wt() from the stats package. It will give you an EWMA volatility, which you can then, given the normal distribution assumption, easily transform into VaR.

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