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Extreme Spectral Risk Measures: An Application to Futures Clearinghouse Margin Requirements

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  • Cotter, JOhn
  • Dowd, Kevin

Abstract

This 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 more familiar VaR and Expected Shortfall (ES) measures of risk, and also compares the precision and discusses the relative usefulness of each of these risk measures.

Suggested Citation

  • Cotter, JOhn & Dowd, Kevin, 2006. "Extreme Spectral Risk Measures: An Application to Futures Clearinghouse Margin Requirements," MPRA Paper 3505, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:3505
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    References listed on IDEAS

    as
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    More about this item

    JEL classification:

    • G00 - Financial Economics - - General - - - General
    • G0 - Financial Economics - - General

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