Backtesting The Parametric & Non-Parametric Estimates Expected Shortfall
(2022) NEKN01 20221Department of Economics
- Abstract
- This paper will examine the forecast ability of different parametric and non-parametric estimation approaches used for Expected Shortfall (ES). As the financial institutions start to shift towards using ES as a risk measure instead of Value at Risk (VaR), the importance of being able to forecast ES increases. The Paper considers Basic Historical Simulation (BHS), Age-Weighted Historical Simulation (AWHS), Volatility-Weighted Historical Simulation (VWHS) and a parametric model based on a Normal distribution as well as t-distribution. These approaches were implemented over OMXS30 and OMXSPI from 1993-2022, as well as Bitcoin from 2011-2022. The results suggest that the TWHH and VWHS are the most reliable approaches in the context of... (More)
- This paper will examine the forecast ability of different parametric and non-parametric estimation approaches used for Expected Shortfall (ES). As the financial institutions start to shift towards using ES as a risk measure instead of Value at Risk (VaR), the importance of being able to forecast ES increases. The Paper considers Basic Historical Simulation (BHS), Age-Weighted Historical Simulation (AWHS), Volatility-Weighted Historical Simulation (VWHS) and a parametric model based on a Normal distribution as well as t-distribution. These approaches were implemented over OMXS30 and OMXSPI from 1993-2022, as well as Bitcoin from 2011-2022. The results suggest that the TWHH and VWHS are the most reliable approaches in the context of estimating ES. (Less)
Please use this url to cite or link to this publication:
http://lup.lub.lu.se/student-papers/record/9084303
- author
- Eiken, Johan LU and Winchester, Oliver LU
- supervisor
- organization
- course
- NEKN01 20221
- year
- 2022
- type
- H1 - Master's Degree (One Year)
- subject
- keywords
- Expected Shortfall, Value-at-Risk, Backtest, Historical Simulation
- language
- English
- id
- 9084303
- date added to LUP
- 2022-10-10 09:21:38
- date last changed
- 2022-10-10 09:21:38
@misc{9084303, abstract = {{This paper will examine the forecast ability of different parametric and non-parametric estimation approaches used for Expected Shortfall (ES). As the financial institutions start to shift towards using ES as a risk measure instead of Value at Risk (VaR), the importance of being able to forecast ES increases. The Paper considers Basic Historical Simulation (BHS), Age-Weighted Historical Simulation (AWHS), Volatility-Weighted Historical Simulation (VWHS) and a parametric model based on a Normal distribution as well as t-distribution. These approaches were implemented over OMXS30 and OMXSPI from 1993-2022, as well as Bitcoin from 2011-2022. The results suggest that the TWHH and VWHS are the most reliable approaches in the context of estimating ES.}}, author = {{Eiken, Johan and Winchester, Oliver}}, language = {{eng}}, note = {{Student Paper}}, title = {{Backtesting The Parametric & Non-Parametric Estimates Expected Shortfall}}, year = {{2022}}, }