Risk Measures At Risk- Are we missing the point? Discussions around sub-additivity and distortion

Dominique Guegan () and Bertrand K. Hassani ()
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Dominique Guegan: CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique
Bertrand K. Hassani: CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique

Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) from HAL

Abstract: This paper discusses the regulatory requirements (Basel Committee, ECB-SSM andEBA) to measure the major risks of financial institutions, for instance Market, Credit and Operational, regarding the choice of the risk measures, the choice of the distributions used to model them and the level of confidence. We highlight and illustrate paradoxes and issues observed when implementing one approach over another, the inconsistencies between the methodologies suggested and the goals required to achieve them. We focus on the notion of sub-additivity and alternative risk measures, providing the supervisor with some recommendations and risk managers with some tools to assess and manage the risks in a financial institution.

Keywords: Spectral measure; Distortion; Risk measures; Sub-additivity; Level of confidence; Distributions; Financial regulation (search for similar items in EconPapers)
Date: 2016-04
New Economics Papers: this item is included in nep-rmg
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-01318093
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Citations: View citations in EconPapers (3)

Published in 2016

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