Uncertainty in historical Value-at-Risk: an alternative quantile-based risk measure

Dominique Guegan (), Bertrand K. Hassani () and Kehan Li ()
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Dominique Guegan: Centre d'Economie de la Sorbonne, https://cv.archives-ouvertes.fr/dominique-guegan
Bertrand K. Hassani: Grupo Santander et Centre d'Economie de la Sorbonne, https://centredeconomiesorbonne.univ-paris1.fr
Kehan Li: Centre d'Economie de la Sorbonne, https://centredeconomiesorbonne.univ-paris1.fr

Documents de travail du Centre d'Economie de la Sorbonne from Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne

Abstract: The financial industry has extensively used quantile-based risk measures relying on the Value-at-Risk (VaR). They need to be estimated from relevant historical data set. Consequently, they contain uncertainty. We propose an alternative quantile-based risk measure (the Spectral Stress VaR) to capture the uncertainty in the historical VaR approach. This one provides flexibility to the risk manager to implement prudential regulatory framework. It can be a VaR based stressed risk measure. In the end we propose a stress testing application for it

Keywords: Historical method; Uncertainty; Value-at-Risk; Stress risk measure; Tail risk measure; Prudential financial regulation; Stress testing (search for similar items in EconPapers)
JEL-codes: C14 G28 G32 (search for similar items in EconPapers)
Pages: 10 pages
Date: 2016-01
New Economics Papers: this item is included in nep-ban, nep-ore and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:mse:cesdoc:16006

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