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How Sensitive are Tail-related Risk Measures in a Contamination Neighbourhood?

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  • Härdle, Wolfgang Karl
  • Ling, Chengxiu

Abstract

Estimation or mis-specification errors in the portfolio loss distribution can have a considerable impact on risk measures. This paper investigates the sensitivity of tail-related risk measures including the Value-at-Risk, expected shortfall and the expectile-quantile transformation level in an epsiloncontamination neighbourhood. The findings give the different approximations via the tail heaviness of the contamination models and its contamination levels. Illustrating examples and an empirical study on the dynamic CRIX capturing and displaying the market movements are given. The codes used to obtain the results in this paper are available via https://github.com/QuantLet/SRMC

Suggested Citation

  • Härdle, Wolfgang Karl & Ling, Chengxiu, 2018. "How Sensitive are Tail-related Risk Measures in a Contamination Neighbourhood?," IRTG 1792 Discussion Papers 2018-010, Humboldt University of Berlin, International Research Training Group 1792 "High Dimensional Nonstationary Time Series".
    • Handle: RePEc:zbw:irtgdp:2018010
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    More about this item

    Keywords

    Sensitivity; expected shortfall; expectile; Value-at-Risk; risk management; influence function; CRIX;
    All these keywords.

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies

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