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Comparative Analyses of Expected Shortfall and Value-at-Risk: Their Estimation Error, Decomposition, and Optimization

Yasuhiro Yamai and Toshinao Yoshiba
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Yasuhiro Yamai: Institute for Monetary & Econ Studies, Bank of Japan
Toshinao Yoshiba: Institute for Monetary & Econ Studies, Bank of Japan

Monetary and Economic Studies, 2002, vol. 20, issue 1, 87-121

Abstract: We compare expected shortfall with value-at-risk (VaR) in three aspects: estimation errors, decomposition into risk factors, and optimization. We describe the advantages and the disadvantages of expected shortfall over VaR. We show that expected shortfall is easily decomposed and optimized while VaR is not. We also show that expected shortfall needs a larger size of sample than VaR for the same level of accuracy.

JEL-codes: G13 G32 D81 G11 (search for similar items in EconPapers)
Date: 2002
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