Risk Measure Inference
We propose a bootstrap-based test of the null hypothesis of equality of two firms' conditional Risk Measures (RMs) at a single point in time. The test can be applied to a wide class of conditional risk measures issued from parametric or semi-parametric models. Our iterative testing procedure produces a grouped ranking of the RMs which has direct application for systemic risk analysis. A Monte Carlo simulation demonstrates that our test has good size and power properties. We propose an application to a sample of U.S. financial institutions using CoVaR, MES, and SRISK, and conclude that only SRISK can be estimated with enough precision to allow for meaningful ranking.
|Date of creation:||28 Feb 2015|
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