The quantum harmonic oscillator expected shortfall model

Vladimir M. Markovic, Nikola Radivojevic, Tatjana Ivanovic, Slobodan Radisic and Nenad Novakovic ()

Estudios de Economia, 2023, vol. 50, issue 2 Year 2023, 233-261

Abstract: This paper presents a new Expected Shortfall (ES) model based on the Quantum Harmonic Oscillator (QHO). It is used to estimate market risk in banks and other financial institutions according to Basel III standard. Predictions of the model agree with the empirical data which displays deviations from normality. Using backtesting, it is shown that the model can be reliably used to assess market risk.

Keywords: Expected Shortfall; market risk; Basel III standard; stock returns; S&P index (search for similar items in EconPapers)
JEL-codes: C22 C52 C53 G24 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:udc:esteco:v:50:y:2023:i:2:p:233-261

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