EconPapers    
Economics at your fingertips  
 

The Risk Map: A new tool for validating risk models

Gilbert Colletaz, Christophe Hurlin and Christophe Perignon ()

Journal of Banking & Finance, 2013, vol. 37, issue 10, 3843-3854

Abstract: This paper presents a new method to validate risk models: the Risk Map. This method jointly accounts for the number and the magnitude of extreme losses and graphically summarizes all information about the performance of a risk model. It relies on the concept of a super exception, which is defined as a situation in which the loss exceeds both the standard Value-at-Risk (VaR) and a VaR defined at an extremely low probability. We then formally test whether the sequences of exceptions and super exceptions are rejected by standard model validation tests. We show that the Risk Map can be used to validate market, credit, operational, or systemic risk estimates (VaR, stressed VaR, expected shortfall, and CoVaR) or to assess the performance of the margin system of a clearing house.

Keywords: Financial risk management; Tail risk; Basel III (search for similar items in EconPapers)
JEL-codes: G21 G28 G32 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (27)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0378426613002628
Full text for ScienceDirect subscribers only

Related works:
Working Paper: The Risk Map: A New Tool for Validating Risk Models (2012) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:37:y:2013:i:10:p:3843-3854

DOI: 10.1016/j.jbankfin.2013.06.006

Access Statistics for this article

Journal of Banking & Finance is currently edited by Ike Mathur

More articles in Journal of Banking & Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().

 
Page updated 2025-03-19
Handle: RePEc:eee:jbfina:v:37:y:2013:i:10:p:3843-3854