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Unbiased estimation of risk

Marcin Pitera and Thorsten Schmidt

Journal of Banking & Finance, 2018, vol. 91, issue C, 133-145

Abstract: The estimation of risk measures recently gained a lot of attention, partly because of the backtesting issues of expected shortfall related to elicitability. In this work we shed a new and fundamental light on optimal estimation procedures of risk measures in terms of bias. We show that once the parameters of a model need to be estimated, one has to take additional care when estimating risks. The typical plug-in approach, for example, introduces a bias which leads to a systematic underestimation of risk.

Keywords: Value-at-risk; Tail value-at-risk; Expected shortfall; Risk measure; Estimation of risk measures; Bias; Risk estimation; Elicitability; Backtest; Unbiased estimation of risk measures (search for similar items in EconPapers)
Date: 2018
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