Testing Expected Shortfall Models for Derivative Positions
AbstractIn this paper we test several risk management models for computing expected shortfall for one-period hedge errors of hedged derivatives positions.Contrary to value-at-risk, expected shortfall cannot be tested using the standard binomial test, since we need information of the distribution in the tail.As derivatives positions change characteristics and thereby the size of risk exposures over time one cannot apply the standard tests based on stationarity.To overcome this problem, we present a transformation procedure.For comparison purposes the tests are also performed for value-at-risk.
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Bibliographic InfoPaper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 2003-24.
Date of creation: 2003
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testing; models; distribution; risk management; derivatives;
Find related papers by JEL classification:
- C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
- G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2003-04-13 (All new papers)
- NEP-CFN-2003-04-13 (Corporate Finance)
- NEP-CUL-2003-04-13 (Cultural Economics)
- NEP-FIN-2003-04-13 (Finance)
- NEP-RMG-2003-04-13 (Risk Management)
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