Risk Measure Inference
AbstractWe propose a widely applicable bootstrap based test of the null hypothesis of equality of two firms' Risk Measures (RMs) at a single point in time. The test can be applied to any market-based measure. In an iterative procedure, we can identify a complete grouped ranking of the RMs, with particular application to finding buckets of fi rms of equal systemic risk. An extensive Monte Carlo Simulation shows desirable properties. We provide an application on a sample of 94 U.S. financial institutions using the ΔCoVaR, MES and %SRISK, and conclude only the %SRISK can be estimated with enough precision to allow for a meaningful ranking.
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Date of creation: 28 Oct 2013
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Bootstrap; Grouped Ranking; Risk Measures; Uncertainty;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-11-09 (All new papers)
- NEP-BAN-2013-11-09 (Banking)
- NEP-ECM-2013-11-09 (Econometrics)
- NEP-ORE-2013-11-09 (Operations Research)
- NEP-RMG-2013-11-09 (Risk Management)
- NEP-UPT-2013-11-09 (Utility Models & Prospect Theory)
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