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Comparative Analyses of Expected Shortfall and Value-at-Risk (2): Expected Utility Maximization and Tail Risk


  • Yamai, Yasuhiro

    (Bank of Japan)

  • Yoshiba, Toshinao

    (Bank of Japan)


We compare expected shortfall and value-at-risk (VaR) in terms of consistency with expected utility maximization and elimination of tail risk. We use the concept of stochastic dominance in studying these two aspects of risk measures. We conclude that expected shortfall is more applicable than VaR in those two aspects. Expected shortfall is consistent with expected utility maximization and is free of tail risk, under more lenient conditions than VaR.

Suggested Citation

  • Yamai, Yasuhiro & Yoshiba, Toshinao, 2002. "Comparative Analyses of Expected Shortfall and Value-at-Risk (2): Expected Utility Maximization and Tail Risk," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 20(2), pages 95-115, April.
  • Handle: RePEc:ime:imemes:v:20:y:2002:i:2:p:95-115

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    Cited by:

    1. repec:eee:reveco:v:60:y:2019:i:c:p:95-113 is not listed on IDEAS
    2. Chia-Lin Chang & Juan-Ángel Jiménez-Martín & Esfandiar Maasoumi & Michael McAleer & Teodosio Pérez-Amaral, 2015. "A Stochastic Dominance Approach to the Basel III Dilemma: Expected Shortfall or VaR?," Tinbergen Institute Discussion Papers 15-056/III, Tinbergen Institute.
    3. repec:pal:jbkreg:v:20:y:2019:i:2:d:10.1057_s41261-018-0080-5 is not listed on IDEAS
    4. Christian Gourieroux & Wei Liu, 2006. "Efficient Portfolio Analysis Using Distortion Risk Measures," Working Papers 2006-17, Center for Research in Economics and Statistics.
    5. repec:eee:intfin:v:57:y:2018:i:c:p:80-93 is not listed on IDEAS
    6. Peter J. Barry & Bruce J. Sherrick & Jianmei Zhao, 2009. "Integration of VaR and expected utility under departures from normality," Agricultural Economics, International Association of Agricultural Economists, vol. 40(6), pages 691-699, November.
    7. Brandtner, Mario & Kürsten, Wolfgang, 2017. "Consistent modeling of risk averse behavior with spectral risk measures: Wächter/Mazzoni revisited," European Journal of Operational Research, Elsevier, vol. 259(1), pages 394-399.
    8. Chang, Chia-Lin & Jimenez-Martin, Juan-Angel & Maasoumi, Esfandiar & McAleer, Michael & Pérez-Amaral, Teodosio, 2019. "Choosing expected shortfall over VaR in Basel III using stochastic dominance," International Review of Economics & Finance, Elsevier, vol. 60(C), pages 95-113.
    9. repec:spr:annopr:v:248:y:2017:i:1:d:10.1007_s10479-016-2251-z is not listed on IDEAS
    10. repec:aag:wpaper:v:23:y:2019:i:1:p:62-87 is not listed on IDEAS

    More about this item

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty


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