A Non-parametric Method for Calculating Conditional Stressed Value at Risk


We consider the Value at Risk (VaR) of a portfolio under stressed conditions. In practice, the stressed VaR (sVaR) is commonly calculated using the data set that includes the stressed period. It tells us how much the risk amount increases if we use the stressed data set. In this paper, we consider the VaR under stress scenarios. Technically, this can be done by deriving the distribution of profit or loss conditioned on the value of risk factors. We use two methods; the one that uses the linear model and the one that uses the Hermite expansion discussed by Marumo and Wolff (2013, 2016). Numerical examples shows that the method using the Hermite expansion is capable of capturing the non-linear effects such as correlation collapse and volatility clustering, which are often observed in the markets.

Об авторе

Kohei Marumo
Saitama University

Список литературы

1. Basel Committee on Banking Supervision. Fundamental review of the trading book : A revised market risk framework. Consultative Document, Bank for International Settlements, Oct. 2013.

2. European Banking Authority. EBA guidelines on stressed value at risk (stressed VaR). Technical report, European Banking Authority, 2012.

3. P. Gibart. Stressed VaR. Technical report, Cr´ edit Agricole, 2012.

4. K. Hong. Analytical method of computing stressed value-at-risk with conditional value-at-risk. Journal of Risk, 19(3):85–106, 2017.

5. K. Marumo and R. C. Wolff. A non-parametric method for approximating joint densities and copula functions for financial markets. Saitama University Working Paper, (4), 2013.

6. K. Marumo and R. C. Wolff. On optimal smoothing of density estimators obtained from orthogonal polynomial expansion methods. Journal of Risk, 18(3), 2016.

7. C. P´ erignon and D. R. Smith. The level and quality of value-at-risk disclosure by commercial banks. Journal of Banking and Finance, 34:362–377, 2010.

Дополнительные файлы

Для цитирования: . . Статистика и Экономика. 2017;(5).

For citation: Marumo K. A Non-parametric Method for Calculating Conditional Stressed Value at Risk. Statistics and Economics. 2017;(5).

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