Sensitivity Analysis of VaR Expected Shortfall for Portfolios Under Netting Agreements

Jean-David Fermanian () and Olivier Scaillet
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Jean-David Fermanian: CDC Ixis Capital Markets and CREST

FAME Research Paper Series from International Center for Financial Asset Management and Engineering

Abstract: In this paper, we characterize explicitly the first derivative of the Value at Risk and the Expected 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 the impact of netting agreements in credit risk management. We further provide nonpara-metric estimators for sensitivities and derive their asymptotic distributions. An empirical application on a typical banking portfolio is finally provided.

Keywords: Value at Risk; Expected Shortfall; Sensitivity; Risk Management; Credit Risk; Netting. (search for similar items in EconPapers)
JEL-codes: C14 D81 G10 G21 G22 (search for similar items in EconPapers)
Date: 2003-07
New Economics Papers: this item is included in nep-ecm and nep-fin
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