Rating parametric and nonparametric methods for estimating the expected shortfall and value at risk

Subject Areas : Journal of Investment Knowledge

Mohammadreza  Rostami ¹ (Assistant Professor of Finance Management, Alzahra University)
Alireza  Saranj ² (Assistant Professor of Finance Management, Tehran University)
Zoha  Savari ³ (Graduate Student of Financial Management, Alzahra University (Corresponding Author))

Received: 2016-11-02 Accepted : 2017-02-23 Published : 2017-07-23

Keywords: christofferson test, Value at risk, expectedshortfall, historical simulation and para,

Abstract :

Financial market developments make it more important to measure market risks correctly. In this paper we investigatethe forecasting accuracy of different historical simulation models in relation to the risk measure expected shortfall and in comparison to established parametric models.we used historical simulation, mirrored historical simulatin,volatility weighted historical simulation,filtered historical simulation and GARCH(1,1) models.The data that we used consists of Tehran stock exchange market index from 2010 to 2014.Christofferson backtest used for value at risk and mc neil & frey backtest used for expected shortfall. According to unconditional coverage backtesting ,mirrored historical simulation model was rejected and others were accepted and  according to independence backtesting all models were accepted thus the christoferson backtest will omit the mirrored historical simulation model and According to mc neil and frey backtest all models were accepted and finally the model confidence set procedure showed that semi parametric models are best models to forecast expected shortfall.

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