Extreme Spectral Risk Measures: An Application to Futures Clearinghouse Margin Requirements
AbstractThis paper applies the Extreme-Value (EV) Generalised Pareto distribution to the extreme tails of the return distributions for the S&P500, FT100, DAX, Hang Seng, and Nikkei225 futures contracts. It then uses tail estimators from these contracts to estimate spectral risk measures, which are coherent risk measures that reflect a user’s risk-aversion function. It compares these to VaR and Expected Shortfall (ES) risk measures, and compares the precision of their estimators. It also discusses the usefulness of these risk measures in the context of clearinghouses setting initial margin requirements, and compares these to the SPAN measures typically used.
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Bibliographic InfoPaper provided by Geary Institute, University College Dublin in its series Working Papers with number 200516.
Length: 35 pages
Date of creation: 24 Jun 2011
Date of revision:
Spectral risk measures; Expected Shortfall; Value at Risk; Extreme Value; clearinghouse;
Other versions of this item:
- Cotter, John & Dowd, Kevin, 2006. "Extreme spectral risk measures: An application to futures clearinghouse margin requirements," Journal of Banking & Finance, Elsevier, vol. 30(12), pages 3469-3485, December.
- Cotter, JOhn & Dowd, Kevin, 2006. "Extreme Spectral Risk Measures: An Application to Futures Clearinghouse Margin Requirements," MPRA Paper 3505, University Library of Munich, Germany.
- John Cotter & Kevin Dowd, 2011. "Extreme Spectral Risk Measures: An Application to Futures Clearinghouse Margin Requirements," Papers 1103.5653, arXiv.org.
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-07-02 (All new papers)
- NEP-RMG-2011-07-02 (Risk Management)
- NEP-UPT-2011-07-02 (Utility Models & Prospect Theory)
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