Estimation of multiple period expected shortfall and median shortfall for risk management

Publisher:
IOP Publishing Ltd.
Publication Type:
Journal article
Citation:
So Mike and Wong Chi Ming 2011, 'Estimation of multiple period expected shortfall and median shortfall for risk management', IOP Publishing Ltd., vol. 12, no. 5, pp. 739-754.
Issue Date:
2011
Full metadata record
Files in This Item:
Filename Description Size
Thumbnail2010001243.pdf1.43 MB
Adobe PDF
With the regulatory requirements for risk management, Value at Risk (VaR) has become an essential tool in determining capital reserves to protect the risk induced by adverse market movements. The fact that VaR is not coherent has motivated the industry to explore alternative risk measures such as expected shortfall. The first objective of this paper is to propose statistical methods for estimating multiple-period expected shortfall under GARCH models. In addition to the expected shortfall, we investigate a new tool called median shortfall to measure risk. The second objective of this paper is to develop backtesting methods for assessing the performance of expected shortfall and median shortfall estimators from statistical and financial perspectives. By applying our expected shortfall estimators and other existing approaches to seven international markets, we demonstrate the superiority of our methods with respect to statistical and practical evaluations. Our expected shortfall estimators likely provide an unbiased reference for setting the minimum capital required for safeguarding against expected loss.
Please use this identifier to cite or link to this item: