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Estimating financial risk measures for futures positions : a non-parametric approach

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  • John Cotter
  • Kevin Dowd

Abstract

This paper presents non-parametric estimates of spectral risk measures applied to long and short positions in 5 prominent equity futures contracts. It also compares these to estimates of two popular alternative measures, the Value-at-Risk (VaR) and Expected Shortfall (ES). The spectral risk measures are conditioned on the coefficient of absolute risk aversion, and the latter two are conditioned on the confidence level. Our findings indicate that all risk measures increase dramatically and their estimators deteriorate in precision when their respective conditioning parameter increases. Results also suggest that estimates of spectral risk measures and their precision levels are of comparable orders of magnitude as those of more conventional risk measures.

Suggested Citation

  • John Cotter & Kevin Dowd, 2006. "Estimating financial risk measures for futures positions : a non-parametric approach," Centre for Financial Markets Working Papers 10197/1172, Research Repository, University College Dublin.
    • Handle: RePEc:rru:cfmwps:10197/1172
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    File URL: http://hdl.handle.net/10197/1172
    File Function: First version, 2006
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    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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