IDEAS home Printed from https://ideas.repec.org/h/pal/qpochp/978-1-137-54464-3_16.html
   My bibliography  Save this book chapter

Expected Shortfall as a Response to Model Risk

In: Postmodern Portfolio Theory

Author

Listed:
  • James Ming Chen

    (Michigan State University)

Abstract

Reducing the vulnerability of parametric VaR to model risk by improving its robustness addresses merely one threat to the reliability of VaR analysis. The most serious menace to VaR—and to the technique’s viability as the Basel Accords’ preferred approach to financial risk management—lies in VaR’s failure to satisfy the theoretical rigors demanded of “coherent” measures of risk.1 The expected shortfall for any confidence interval, which is derived directly from VaR for that interval, is subadditive and coherent. VaR itself is not.2 The allure of subadditivity and coherence supports Basel III’s embrace of expected shortfall as the international banking system’s preferred measure of market risk.

Suggested Citation

  • James Ming Chen, 2016. "Expected Shortfall as a Response to Model Risk," Quantitative Perspectives on Behavioral Economics and Finance, in: Postmodern Portfolio Theory, chapter 0, pages 291-305, Palgrave Macmillan.
    • Handle: RePEc:pal:qpochp:978-1-137-54464-3_16
    DOI: 10.1057/978-1-137-54464-3_16
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pal:qpochp:978-1-137-54464-3_16. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.palgrave.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.