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Backtesting expected shortfall: A quantitative evaluation
KTH, School of Engineering Sciences (SCI), Mathematics (Dept.), Mathematical Statistics.
2016 (English)Independent thesis Advanced level (degree of Master (Two Years)), 20 credits / 30 HE creditsStudent thesisAlternative title
Backtesting av expected shortfall: en kvantitativ studie (Swedish)
Abstract [en]

How to measure risk is an important question in finance and much work has been done on how to quantitatively measure risk. An important part of this measurement is evaluating the measurements against the outcomes a procedure known as backtesting. A common risk measure is Expected shortfall for which how to backtest has been debated. In this thesis we will compare four different proposed backtests and see how they perform in a realistic setting. The main finding in this thesis is that it is possible to find backtests that perform well but it is important to investigate them thoroughly as small errors in the model can lead to large errors in the outcome of the

backtest

Abstract [sv]

Hur man mäter risk är en viktig fråga inom den finansiella industrin och det finns mycket skrivet om hur man kvantifierar finansiell risk. En viktig del i att mäta risk är att i efterhand kontrollera så att modellerna har gett rimliga estimeringar av risken denna procedur brukar kallas backtesting. Ett vanligt mått på risk är Expected shortfall där hur detta ska göras har debatterats. Vi presenterar fyra olika metoder att utföra detta och se hur dessa presterar i en verklighetstrogen situation. Det vi kommer fram till är att det är möjligt att hitta metoder som fungerar väl men att det är viktigt att testa dessa noga eftersom små fel i metoderna kan ge stora fel i resultatet.

Place, publisher, year, edition, pages
2016.
Series
TRITA-MAT-E ; 2016:57
National Category
Mathematical Analysis
Identifiers
URN: urn:nbn:se:kth:diva-198471OAI: oai:DiVA.org:kth-198471DiVA, id: diva2:1056983
Subject / course
Financial Mathematics
Educational program
Master of Science - Mathematics
Supervisors
Examiners
Available from: 2016-12-16 Created: 2016-12-15 Last updated: 2016-12-16Bibliographically approved

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CiteExportLink to record
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Citation style
  • apa
  • ieee
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  • nn-NB
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Output format
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