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Estimation of Tail Risk based on Extreme Expectiles


  • Daouia, Abdelaati
  • Girard, Stéphane
  • Stupfler, Gilles


We use tail expectiles to estimate alternative measures to the Value at Risk (VaR), Expected Shortfall (ES) and Marginal Expected Shortfall (MES), three instruments of risk protection of utmost importance in actuarial science and statistical finance. The concept of expectiles is a least squares analogue of quantiles. Both expectiles and quantiles were embedded in the more general class of M-quantiles as the minimizers of an asymmetric convex loss function. It has been proved very recently that the only M-quantiles that are coherent risk measures are the expectiles. Moreover, expectiles define the only coherent risk measure that is also elicit able. The elicit ability corresponds to the existence of a natural backtesting methodology. The estimation of expectiles did not, however, receive yet any attention from the perspective of extreme values. The first estimation method that we propose enables the usage of advanced high quantile and tail index estimators. The second method joins together the least asymmetrically weighted squares estimation with the tail restrictions of extreme-value theory. A main tool is to first estimate the large expectile-based VaR, ES and MES when they are covered by the range of the data, and then extrapolate these estimates to the very far tails. We establish the limit distributions of the proposed estimators when they are located in the range of the data or near and even beyond the maximum observed loss. We show through a detailed simulation study the good performance of the procedures, and also present concrete applications to medical insurance data and three large US investment banks.

Suggested Citation

  • Daouia, Abdelaati & Girard, Stéphane & Stupfler, Gilles, 2015. "Estimation of Tail Risk based on Extreme Expectiles," TSE Working Papers 15-566, Toulouse School of Economics (TSE), revised Jul 2017.
  • Handle: RePEc:tse:wpaper:29257

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    References listed on IDEAS

    1. Kuan, Chung-Ming & Yeh, Jin-Huei & Hsu, Yu-Chin, 2009. "Assessing value at risk with CARE, the Conditional Autoregressive Expectile models," Journal of Econometrics, Elsevier, vol. 150(2), pages 261-270, June.
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    5. Bellini, Fabio & Klar, Bernhard & Müller, Alfred & Rosazza Gianin, Emanuela, 2014. "Generalized quantiles as risk measures," Insurance: Mathematics and Economics, Elsevier, vol. 54(C), pages 41-48.
    6. Abdelaati Daouia & Laurent Gardes & Stéphane Girard & Alexandre Lekina, 2011. "Kernel estimators of extreme level curves," TEST: An Official Journal of the Spanish Society of Statistics and Operations Research, Springer;Sociedad de Estadística e Investigación Operativa, vol. 20(2), pages 311-333, August.
    7. Belkacem Abdous & Bruno Remillard, 1995. "Relating quantiles and expectiles under weighted-symmetry," Annals of the Institute of Statistical Mathematics, Springer;The Institute of Statistical Mathematics, vol. 47(2), pages 371-384, June.
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    Cited by:

    1. George Tzagkarakis & Frantz Maurer, 2020. "An energy-based measure for long-run horizon risk quantification," Annals of Operations Research, Springer, vol. 289(2), pages 363-390, June.
    2. Daouia, Abdelaati & Girard, Stéphane & Stupfler, Gilles, 2017. "Extreme M-quantiles as risk measures: From L1 to Lp optimization," TSE Working Papers 17-841, Toulouse School of Economics (TSE).
    3. Daouia, Abdelaati & Girard, Stéphane & Stupfler, Gilles, 2018. "Tail expectile process and risk assessment," TSE Working Papers 18-944, Toulouse School of Economics (TSE).
    4. Tadese, Mekonnen & Drapeau, Samuel, 2020. "Relative bound and asymptotic comparison of expectile with respect to expected shortfall," Insurance: Mathematics and Economics, Elsevier, vol. 93(C), pages 387-399.
    5. Tran, Ngoc M. & Burdejová, Petra & Ospienko, Maria & Härdle, Wolfgang K., 2019. "Principal component analysis in an asymmetric norm," Journal of Multivariate Analysis, Elsevier, vol. 171(C), pages 1-21.
    6. Véronique Maume-Deschamps & Didier Rullière & Khalil Said, 2017. "Multivariate Extensions Of Expectiles Risk Measures," Working Papers hal-01367277, HAL.
    7. Maume-Deschamps Véronique & Said Khalil & Rullière Didier, 2017. "Multivariate extensions of expectiles risk measures," Dependence Modeling, De Gruyter, vol. 5(1), pages 20-44, January.
    8. James Ming Chen, 2018. "On Exactitude in Financial Regulation: Value-at-Risk, Expected Shortfall, and Expectiles," Risks, MDPI, Open Access Journal, vol. 6(2), pages 1-28, June.
    9. Yiqing Chen, 2019. "A Renewal Shot Noise Process with Subexponential Shot Marks," Risks, MDPI, Open Access Journal, vol. 7(2), pages 1-8, June.
    10. Daouia, Abdelaati & Paindaveine, Davy, 2019. "From Halfspace M-Depth to Multiple-output Expectile Regression," TSE Working Papers 19-1022, Toulouse School of Economics (TSE).

    More about this item


    Asymmetric squared loss; Coherent Value-at-Risk; Expected shortfall; Expectiles; Extrapolation; Extreme value theory; Heavy tails;

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