Backtesting Value At Risk And Expected Shortfall
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Backtesting Value At Risk And Expected Shortfall
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Author : Simona Roccioletti
language : en
Publisher: Springer
Release Date : 2015-12-04
Backtesting Value At Risk And Expected Shortfall written by Simona Roccioletti and has been published by Springer this book supported file pdf, txt, epub, kindle and other format this book has been release on 2015-12-04 with Business & Economics categories.
In this book Simona Roccioletti reviews several valuable studies about risk measures and their properties; in particular she studies the new (and heavily discussed) property of "Elicitability" of a risk measure. More important, she investigates the issue related to the backtesting of Expected Shortfall. The main contribution of the work is the application of "Test 1" and "Test 2" developed by Acerbi and Szekely (2014) on different models and for five global market indexes.
Backtesting Value At Risk And Expected Shortfall In The Presence Of Estimation Error
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Author : Sander Barendse
language : en
Publisher:
Release Date : 2019
Backtesting Value At Risk And Expected Shortfall In The Presence Of Estimation Error written by Sander Barendse and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2019 with categories.
We investigate the effect of estimation error on backtests of (multi-period) expected shortfall (ES) forecasts. These backtests are based on first order conditions of a recently introduced family of jointly consistent loss functions for Value-at-Risk (VaR) and ES. We provide explicit expressions for the additional terms in the asymptotic covariance matrix that result from estimation error, and propose robust tests that account for it. Monte Carlo experiments show that the tests that ignore these terms suffer from size distortions, which are more pronounced for higher ratios of outof-sample to in-sample observations. Robust versions of the backtests perform well, although this also depends on the choice of conditioning variables. In an application to VaR and ES forecasts for daily FTSE 100 index returns as generated by AR-GARCH, AR-GJR-GARCH, and AR-HEAVY models, we find that estimation error substantially impacts the outcome of the backtests.
Robust Forecasting And Backtesting Of Value At Risk Var And Expected Shortfall Es Risk Measures
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Author : Christos Argyropoulos
language : en
Publisher:
Release Date : 2017
Robust Forecasting And Backtesting Of Value At Risk Var And Expected Shortfall Es Risk Measures written by Christos Argyropoulos and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2017 with categories.
Backtesting Var Models
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Author : Timotheos Angelidis
language : en
Publisher:
Release Date : 2018
Backtesting Var Models written by Timotheos Angelidis and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2018 with categories.
Academics and practitioners have extensively studied Value-at-Risk (VaR) to propose a unique risk management technique that generates accurate VaR estimations for long and short trading positions and for all types of financial assets. However, they have not succeeded yet as the testing frameworks of the proposals developed, have not been widely accepted. A two-stage backtesting procedure is proposed to select a model that not only forecasts VaR but also predicts the losses beyond VaR. Numerous conditional volatility models that capture the main characteristics of asset returns (asymmetric and leptokurtic unconditional distribution of returns, power transformation and fractional integration of the conditional variance) under four distributional assumptions (normal, GED, Student-t, and skewed Student-t) have been estimated to find the best model for three financial markets, long and short trading positions, and two confidence levels. By following this procedure, the risk manager can significantly reduce the number of competing models that accurately predict both the VaR and the Expected Shortfall (ES) measures.
Hands On Value At Risk And Expected Shortfall
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Author : Martin Auer
language : en
Publisher: Springer
Release Date : 2018-02-01
Hands On Value At Risk And Expected Shortfall written by Martin Auer and has been published by Springer this book supported file pdf, txt, epub, kindle and other format this book has been release on 2018-02-01 with Business & Economics categories.
This book describes a maximally simple market risk model that is still practical and main risk measures like the value-at-risk and the expected shortfall. It outlines the model's (i) underlying math, (ii) daily operation, and (iii) implementation, while stripping away statistical overhead to keep the concepts accessible. The author selects and weighs the various model features, motivating the choices under real-world constraints, and addresses the evermore important handling of regulatory requirements. The book targets not only practitioners new to the field but also experienced market risk operators by suggesting useful data analysis procedures and implementation details. It furthermore addresses market risk consumers such as managers, traders, and compliance officers by making the model behavior intuitively transparent. A very useful guide to the theoretical and practical aspects of implementing and operating a risk-monitoring system for a mid-size financial institution. It sets a common body of knowledge to facilitate communication between risk managers, computer and investment specialists by bridging their diverse backgrounds. Giovanni Barone-Adesi — Professor, Universitá della Svizzera italiana This unassuming and insightful book starts from the basics and plainly brings the reader up to speed on both theory and implementation. Shane Hegarty — Director Trade Floor Risk Management, Scotiabank Visit the book’s website at www.value-at-risk.com.
Backtesting Value At Risk Og Expected Shortfall
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Author : Frederik Hau Knudsen
language : da
Publisher:
Release Date : 2016
Backtesting Value At Risk Og Expected Shortfall written by Frederik Hau Knudsen and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2016 with categories.
Multinomial Var Backtests
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Author : Marie Kratz
language : en
Publisher:
Release Date : 2017
Multinomial Var Backtests written by Marie Kratz and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2017 with categories.
Under the Fundamental Review of the Trading Book (FRTB) capital charges for the trading book are based on the coherent expected shortfall (ES) risk measure, which show greater sensitivity to tail risk. In this paper it is argued that backtesting of expected shortfall-or the trading book model from which it is calculated-can be based on a simultaneous multinomial test of value-at-risk (VaR) exceptions at different levels, an idea supported by an approximation of ES in terms of multiple quantiles of a distribution proposed in Emmer et al. (2015). By comparing Pearson, Nass and likelihood-ratio tests (LRTs) for different numbers of VaR levels N it is shown in a series of simulation experiments that multinomial tests with N ≥ 4 are much more powerful at detecting misspecifications of trading book loss models than standard bi-nomial exception tests corresponding to the case N = 1. Each test has its merits: Pearson offers simplicity; Nass is robust in its size properties to the choice of N ; the LRT is very powerful though slightly over-sized in small samples and more computationally burdensome. A traffic-light system for trading book models based on the multinomial test is proposed and the recommended procedure is applied to a real-data example spanning the 2008 financial crisis.
Individual And Flexible Expected Shortfall Backtesting
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Author : Marcelo Righi
language : en
Publisher:
Release Date : 2014
Individual And Flexible Expected Shortfall Backtesting written by Marcelo Righi and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2014 with categories.
In this paper we propose an expected shortfall (ES) backtesting approach that uses the dispersion of a truncated distribution by the estimated value-at-risk (VaR) upper limit, does not limit the approach to the Gaussian case and allows us to test if each individual VaR violation is significantly different from the ES. Moreover, we present a Monte Carlo simulation algorithm to determine the significance of the backtest. We provide an empirical illustration that demonstrates the advantages that our backtests provide, especially the fact that there is no need to wait for a whole backtest period in order to prove the prediction that the ES test is inefficient.
Sample Size Skewness And Leverage Effects In Value At Risk And Expected Shortfall Estimation
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Author : Laura García Jorcano
language : en
Publisher:
Release Date : 2017
Sample Size Skewness And Leverage Effects In Value At Risk And Expected Shortfall Estimation written by Laura García Jorcano and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2017 with categories.
The estimation of risk measures is an area of highest importance in the financial industry. Risk measures play a major role in the risk-management and in the computation of regulatory capital. The Basel III document [13] has suggested to shift from Value-at-Risk (VaR) into Expected Shortfall (ES) as a risk measure and to consider stressed scenarios at a new con dence level of 97:5%. This change is motivated by the appealing theoretical properties of ES as a measure of risk and the poor properties of VaR. In particular, VaR fails to control for tail risk". In this transition, the major challenge faced by nancial institutions is the unavailability of simple tools for evaluation of ES forecasts (i.e. backtesting ES) The objective of this thesis is to compare the performance of a variety of models for VaR and ES estimation for a collection of assets of di erent nature: stock indexes, individual stocks, bonds, exchange rates, and commodities. Throughout the thesis, by a VaR or an ES model" is meant a given speci cation for conditional volatility, combined with an assumption on the probability distribution of return innovations...
A New Approach To Backtesting And Risk Model Selection
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Author : Jacopo Corbetta
language : en
Publisher:
Release Date : 2018
A New Approach To Backtesting And Risk Model Selection written by Jacopo Corbetta and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2018 with categories.
Backtesting risk measures represents a challenge and complex methods are often required. In this paper, we propose a new framework for backtesting that can be applied to every law invariant risk measures. We base our approach on the formalization of the concept of level of coverage associated with the risk model as defined in the original Basel Accord. Thus, we propose two simple hypothesis tests based only on results of probability theory without requiring any approximation or simulation. In addition, within this new framework, we introduce a methodology for selecting the best performing risk model among all the existing alternatives. This proposal adds value to the current state of the art, since, using the traditional loss function approach, any comparison among forecasting outcomes of different risk models appeared to be meaningless. A series of simulation studies show that our hypothesis tests provide similar size and power to the classical binomial tests of value at risk and well-known tests of expected shortfall. A final experiment on real data allows determining the best risk measure procedures among the value at risk, expected shortfall, expectiles and lambda value at risk in different time windows over more than 40 years of daily data.