MODEL-FREE INFERENCE FOR TAIL RISK MEASURES

Ke-Li Xu

Econometric Theory, 2016, vol. 32, issue 1, 122-153

Abstract: Understanding uncertainty in estimating risk measures is important in modern financial risk management. In this paper we consider a nonparametric framework that incorporates auxiliary information available in covariates and propose a family of inferential methods for the value at risk, expected shortfall, and related risk measures. A two-step generalized empirical likelihood test statistic is constructed and is shown to be asymptotically pivotal without requiring variance estimation. We also show its validity when applied to a semiparametric index model. Asymptotic theories are established allowing for serially dependent data. Simulations and an empirical application to Canadian stock return index illustrate the finite sample behavior of the methodologies proposed.

Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:cup:etheor:v:32:y:2016:i:01:p:122-153_00

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