KTH Matematik  

Matematisk Statistik

Tid: 24 april 2017 kl 15.15-16.00.

Seminarierummet 3721, Institutionen för matematik, KTH, Lindstedtsvägen 25, plan 7. Karta!

Föredragshållare: Katja Dalne

Titel: The performance of market risk models for Value-at-Risk and Expected Shortfall: Backtesting in the light of FRTB (Master's thesis)

Abstract The global financial crisis that took off in 2007 gave rise to several adjustments of the risk regulation for banks. One major adjustment that is to be implemented in 2019, is the Fundamental Review of the Trading Book (FRTB). It proposes to use Expected Shortfall (ES) as risk measure instead of Value at Risk (VaR), as well as applying varying liquidity horizons based on the risk level of the asset concerned. The major difficulty of implementing the FRTB lies within backtesting ES. Righi and Ceretta proposes a robust backtest that is based on Monte Carlo simulation and is flexible since it does not assume any probability distribution and can be performed without waiting for a whole backtesting period. Implementing some commonly used VaR backtests as well as the ES backtest, yield which risk measures models that give the most accurate results from both a VaR and an ES backtesting perspective. As a conclusion, a model that yield satisfactory from a VaR backtesting perspective is not necessarily satisfactory from an ES backtesting perspective and vice versa, which is important to keep in mind when implementing the FRTB. Overall, the models that are satisfactory from a VaR backtesting perspective turn out to bee probably too conservative from an ES backtesting perspective. Considering the confidence levels proposed by the FRTB to be implemented, from a VaR backtesting perspective it can be concluded that a simulated hybrid distribution from a normal copula, with Generalized Pareto in the tails and empirical distribution in the center along with GARCH filtration is well suited, as from an ES backtesting perspective a Student?s t distribution with  

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Sidansvarig: Filip Lindskog
Uppdaterad: 25/02-2009