Dynamic semiparametric models for expected shortfall (an value-at-risk)

Patton, Andrew J.; Ziegel, Johanna F.; Chen, Rui (2019). Dynamic semiparametric models for expected shortfall (an value-at-risk). Journal of econometrics, 211(2), pp. 388-413. Elsevier 10.1016/j.jeconom.2018.10.008

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Expected Shortfall (ES) is the average return on a risky asset conditional on the return being below some quantile of its distribution, namely its Value-at-Risk (VaR). The Basel III Accord, which will be implemented in the years leading up to 2019, places new attention on ES, but unlike VaR, there is little existing work on modeling ES. We use recent results from statistical decision theory to overcome the problem of “elicitability” for ES by jointly modeling ES and VaR, and propose new dynamic models for these risk measures. We provide estimation and inference methods for the proposed models, and confirm via simulation studies that the methods have good finite-sample properties. We apply these models to daily returns on four international equity indices, and find the proposed new ES–VaR models outperform forecasts based on GARCH or rolling window models.

Item Type:

Journal Article (Original Article)

Division/Institute:

08 Faculty of Science > Department of Mathematics and Statistics > Institute of Mathematical Statistics and Actuarial Science

UniBE Contributor:

Ziegel, Johanna F.

Subjects:

300 Social sciences, sociology & anthropology > 330 Economics
500 Science > 510 Mathematics

ISSN:

0304-4076

Publisher:

Elsevier

Language:

English

Submitter:

Johanna Fasciati-Ziegel

Date Deposited:

17 Feb 2020 15:46

Last Modified:

30 Mar 2020 09:56

Publisher DOI:

10.1016/j.jeconom.2018.10.008

BORIS DOI:

10.7892/boris.140205

URI:

https://boris.unibe.ch/id/eprint/140205

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