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Sensitivity Analysis of VaR Expected Shortfall for Portfolios Under Netting Agreements

Author

Listed:
  • Jean-David FERMANIAN

    (CDC Ixis Capital Markets and CREST)

  • Olivier SCAILLET

    (HEC Genève and FAME, Université de Genève)

Abstract

In this paper, we characterize explicitly the first derivative of the Value at Risk and the Expected Shortfall with respect to portfolio allocation when netting between positions exists. As a particular case, we examine a simple Gaussian example in order to illustrate the impact of netting agreements in credit risk management. We further provide nonpara-metric estimators for sensitivities and derive their asymptotic distributions. An empirical application on a typical banking portfolio is finally provided.

Suggested Citation

  • Jean-David FERMANIAN & Olivier SCAILLET, 2003. "Sensitivity Analysis of VaR Expected Shortfall for Portfolios Under Netting Agreements," FAME Research Paper Series rp89, International Center for Financial Asset Management and Engineering.
    • Handle: RePEc:fam:rpseri:rp89
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    More about this item

    Keywords

    Value at Risk; Expected Shortfall; Sensitivity; Risk Management; Credit Risk; Netting.;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies

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