Exponential spectral risk measures

Kevin Dowd and John Cotter

Centre for Financial Markets Working Papers from Research Repository, University College Dublin

Abstract: Spectral risk measures are attractive risk measures as they allow the user to obtain risk measures that reflect their subjective risk-aversion. This paper examines spectral risk measures based on an exponential utility function, and finds that these risk measures have nice intuitive properties. It also discusses how they can be estimated using numerical quadrature methods, and how confidence intervals for them can be estimated using a parametric bootstrap. Illustrative results suggest that estimated exponential spectral risk measures obtained using such methods are quite precise in the presence of normally distributed losses.

Keywords: Spectral risk measures; Risk aversion functions; Exponential utility function; Parametric bootstrap; Risk--Econometric models; Utility theory--Mathematical models; Bootstrap (Statistics) (search for similar items in EconPapers)
JEL-codes: G15 (search for similar items in EconPapers)
Date: 2007-03
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http://hdl.handle.net/10197/1195 First version, 2007 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:rru:cfmwps:10197/1195

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