Sensitivity Analysis of Var and Expected Shortfall for Portfolios under Netting Agreements

Jean-David Fermanian and Olivier Scaillet
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Jean-David Fermanian: Crest

No 2003-33, Working Papers from Center for Research in Economics and Statistics

Abstract: In this paper, we characterize explicitly the first derivative of the Value at Risk and theExpected Shortfall with respect to portfolio allocation when netting between positions exists.As a particular case, we examine a simple Gaussian example in order to illustrate theimpact of netting agreements in credit risk management. Collateral issues are also dealtwith. For practical purposes we further provide nonparametric estimators for sensitivitiesand derive their asymptotic distributions. An empirical application on a typical bankingportfolio is finally provided.

Date: 2003
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Journal Article: Sensitivity analysis of VaR and Expected Shortfall for portfolios under netting agreements (2005)
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