This paper presents the first methodological proposal of estimation of the ΛVaR . Our approach is dynamic and calibrated to market extreme scenarios, incorporating the need of regulators and financial institutions in more sensitive risk measures. We also propose a simple backtesting methodology by extending the VaR hypothesis-testing framework. Hence, we test our ΛVaR proposals under extreme downward scenarios of the financial crisis and different assumptions on the profit and loss distribution. The findings show that our ΛVaR estimations are able to capture the tail risk and react to market fluctuations significantly faster than the VaR and expected shortfall. The backtesting exercise displays a higher level of accuracy for our ΛVaR estimations

Hitaj, A., Mateus, C., Peri, I. (2018). Lambda Value at Risk and Regulatory Capital: A Dynamic Approach to Tail Risk. RISKS, 6(1) [10.3390/risks6010017].

Lambda Value at Risk and Regulatory Capital: A Dynamic Approach to Tail Risk

Hitaj, A
Membro del Collaboration Group
;
Peri, I
Membro del Collaboration Group
2018

Abstract

This paper presents the first methodological proposal of estimation of the ΛVaR . Our approach is dynamic and calibrated to market extreme scenarios, incorporating the need of regulators and financial institutions in more sensitive risk measures. We also propose a simple backtesting methodology by extending the VaR hypothesis-testing framework. Hence, we test our ΛVaR proposals under extreme downward scenarios of the financial crisis and different assumptions on the profit and loss distribution. The findings show that our ΛVaR estimations are able to capture the tail risk and react to market fluctuations significantly faster than the VaR and expected shortfall. The backtesting exercise displays a higher level of accuracy for our ΛVaR estimations
Articolo in rivista - Articolo scientifico
banking regulation; financial risk management; risk modelling; value at risk
English
2018
6
1
17
open
Hitaj, A., Mateus, C., Peri, I. (2018). Lambda Value at Risk and Regulatory Capital: A Dynamic Approach to Tail Risk. RISKS, 6(1) [10.3390/risks6010017].
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/10281/197502
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