Uncertainty in historical Value-at-Risk: an alternative quantile-based risk measureReport as inadecuate




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* Corresponding author 1 CES - Centre d-économie de la Sorbonne

Abstract : The financial industry has extensively used quantile-based risk measures relying on the Value-at-Risk (VaR). They need to be estimated from relevant historical data set. Consequently, they contain uncertainty. We propose an alternative quantile-based risk measure (the Spectral Stress VaR) to capture the uncertainty in the historical VaR approach. This one provides flexibility to the risk manager to implement prudential regulatory framework. It can be a VaR based stressed risk measure. In the end we propose a stress testing application for it.

Keywords : Prudential financial regulation Stress risk measure Tail risk measure Historical method Uncertainty Value-at-Risk Stress testing





Author: Dominique Guegan - Bertrand K. Hassani - Kehan Li -

Source: https://hal.archives-ouvertes.fr/



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