*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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