Uncertainty in Historical Value-at-Risk: An Alternative Quantile-Based Risk Measure

Dominique Guégan (), Bertrand Hassani () and Kehan Li ()
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Dominique Guégan: University Paris 1 Panthéon -Sorbonne
Bertrand Hassani: CES UMR 8174, Grupo Santander and Université Paris 1 Panthéon-Sorbonne
Kehan Li: CES UMR 8174, Université Paris 1 Panthéon-Sorbonne

A chapter in Mathematical and Statistical Methods for Actuarial Sciences and Finance, 2017, pp 119-128 from Springer

Abstract: Abstract The financial industry has extensively used quantile-based risk measures relying on the Value-at-Risk (V aR). They need to be estimated from relevant historical data sets. Consequently, they contain uncertainty due to the finiteness of observations in practice. We propose an alternative quantile-based risk measure (the Spectrum Stress V aR) to capture the uncertainty in the historical V aR approach. This one provides flexibility to the risk manager to implement prudential regulatory framework. It can be a V aR based stressed risk measure. In the end we propose a stress testing application for it.

Keywords: Quantile-based Risk Measures; Stress Testing Application; Prudential Regulatory Framework; Stress Spectrum; Basel Committee On Banking Supervision (BCBS) (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-319-50234-2_10

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DOI: 10.1007/978-3-319-50234-2_10

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