Latent Perils: Stressed VaR, Elicitability, and Systemic Effects

James Ming Chen
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James Ming Chen: Michigan State University

Chapter Chapter 17 in Postmodern Portfolio Theory, 2016, pp 307-325 from Palgrave Macmillan

Abstract: Abstract Model risk, as demonstrated by the gap between VaR and its corresponding values for expected shortfall, is hardly the only threat to proper financial risk assessment. Even if we have properly modeled risk, whether by engaging in thorough nonparametric VaR, by specifying the proper parameters in a more accurate parametric model of value at risk, or by substituting more conservative (and coherent) values for expected shortfall in place of VaR, we cannot eliminate the problem of straightforward mistakes in estimation.1 Despite considerable advances in computation, the “fat finger” persists, in typography and in finance.2

Keywords: Risk Measure; Supra Note; Systemic Risk; Market Risk; Credit Spread (search for similar items in EconPapers)
Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:pal:qpochp:978-1-137-54464-3_17

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DOI: 10.1057/978-1-137-54464-3_17

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