Economics at your fingertips  

Calibrating distribution models from PELVE

Hirbod Assa, Liyuan Lin and Ruodu Wang

Papers from

Abstract: The Value-at-Risk (VaR) and the Expected Shortfall (ES) are the two most popular risk measures in banking and insurance regulation. To bridge between the two regulatory risk measures, the Probability Equivalent Level of VaR-ES (PELVE) was recently proposed to convert a level of VaR to that of ES. It is straightforward to compute the value of PELVE for a given distribution model. In this paper, we study the converse problem of PELVE calibration, that is, to find a distribution model that yields a given PELVE, which may either be obtained from data or from expert opinion. We discuss separately the cases when one-point, two-point and curve constraints are given. In the most complicated case of a curve constraint, we convert the calibration problem to that of an advanced differential equation. We further study some technical properties of PELVE by offering a few new results on monotonicity and convergence.

Date: 2022-04
New Economics Papers: this item is included in nep-ban and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link) Latest version (application/pdf)

Related works:
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:

Access Statistics for this paper

More papers in Papers from
Bibliographic data for series maintained by arXiv administrators ().

Page updated 2022-06-28
Handle: RePEc:arx:papers:2204.08882