Estimating Value-at-Risk and Expected Shortfall: Do Polynomial Expansions Outperform Parametric Densities?
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http://hdl.handle.net/10045/129999
Títol: | Estimating Value-at-Risk and Expected Shortfall: Do Polynomial Expansions Outperform Parametric Densities? |
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Autors: | Castillo, Brenda | León Valle, Ángel M. | Mora-López, Juan |
Grups d'investigació o GITE: | Economía Laboral y Econometría (ELYE) | Finanzas de Mercado y Econometría Financiera |
Centre, Departament o Servei: | Universidad de Alicante. Departamento de Fundamentos del Análisis Económico |
Paraules clau: | Value-at-risk | Expected shortfall | Polynomial expansions | Backtesting |
Data de publicació: | 18-de novembre-2022 |
Editor: | MDPI |
Citació bibliogràfica: | Castillo-Brais B, León Á, Mora J. Estimating Value-at-Risk and Expected Shortfall: Do Polynomial Expansions Outperform Parametric Densities? Mathematics. 2022; 10(22):4329. https://doi.org/10.3390/math10224329 |
Resum: | We assess Value-at-Risk (VaR) and Expected Shortfall (ES) estimates assuming different models for the standardized returns: distributions based on polynomial expansions such as Cornish-Fisher and Gram-Charlier, and well-known parametric densities such as normal, skewed-t and Johnson. This paper aims to analyze whether models based on polynomial expansions outperform the parametric ones. We carry out the model performance comparison in two stages: first, with a backtesting analysis of VaR and ES; and second, using loss functions. Our backtesting results show that all distributions, except for normal ones, perform quite well in VaR and ES estimations. Regarding the loss function analysis, we conclude that polynomial expansions (specifically, the Cornish-Fisher one) usually outperform parametric densities in VaR estimation, but the latter (specifically, the Johnson density) slightly outperform the former in ES estimation; however, the gains of using one approach or the other are modest. |
Patrocinadors: | This paper has been supported by Spanish Government under project PID2021-124860NB-I00 and Generalitat Valenciana under project CIPROM/2021/060. |
URI: | http://hdl.handle.net/10045/129999 |
ISSN: | 2227-7390 |
DOI: | 10.3390/math10224329 |
Idioma: | eng |
Tipus: | info:eu-repo/semantics/article |
Drets: | © 2022 by the authors. Licensee MDPI, Basel, Switzerland. This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license (https://creativecommons.org/licenses/by/4.0/). |
Revisió científica: | si |
Versió de l'editor: | https://doi.org/10.3390/math10224329 |
Apareix a la col·lecció: | INV - ELYE - Artículos de Revistas INV - Finanzas de Mercado y Econometría Financiera - Artículos de Revistas |
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Castillo-Brais_etal_2022_Mathematics.pdf | 1,11 MB | Adobe PDF | Obrir Vista prèvia | |
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