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Backtesting Expected Shortfall: the design and implementation of different backtests
KTH, School of Engineering Sciences (SCI), Mathematics (Dept.), Mathematical Statistics.
2015 (English)Independent thesis Advanced level (degree of Master (Two Years)), 20 credits / 30 HE creditsStudent thesisAlternative title
Validering av Expected Shortfall: design och tillämpning av olika metoder (English)
Abstract [en]

In recent years, the question of whether Expected Shortfall is possible to backtest has been a hot topic after the findings of Gneiting in 2011 that Expected Shortfall lacks a mathematical property called elicitability. However, new research has indicated that backtesting of Expected Shortfall is in fact possible and that it does not have to be very difficult. The purpose of this thesis is to show that Expected Shortfall is in fact backtestable by providing six different examples of how a backtest could be designed without exploiting the property of elicitability. The different approaches are tested and their performances are compared against each other. The material can be seen as guidance on how to think in the initial steps of the implementation of an Expected Shortfall backtest in practice.

Abstract [sv]

De senaste åren har frågan om huruvida det är möjligt att hitta backtester som validerar Expected Shortfall varit ett omdiskuterat ämne efter att Gneiting 2011 visade att Expected Shortfall saknade den matematiska egenskapen som kallas elicitabilitet. Ny forskning tyder på att det går att validera Expected Shortfall och att det inte behöver vara alltför svårt. Syftet med den här uppsatsen är att visa att det går att hitta metoder som backtestar Expected Shortfall. Vi gör det genom att visa utförandet av sex olika metoder som validerar Expected Shortfall utan att använda sig av elicitabilitet. De olika metoderna testas och deras egenskaper jämförs mot varandra. Materialet kan ses som en guide i hur man ska tänka i de första stegen i implementeringen av en metod för att backtesta Expected Shortfall. 

Place, publisher, year, edition, pages
2015.
Series
TRITA-MAT-E, 2015:55
Keyword [en]
Expected Shortfall, Backtests, Value-at-Risk, Elicitability
National Category
Mathematical Analysis
Identifiers
URN: urn:nbn:se:kth:diva-172444OAI: oai:DiVA.org:kth-172444DiVA: diva2:848996
External cooperation
Swedbank, Market & Counterparty Risk
Subject / course
Mathematical Statistics
Educational program
Master of Science - Applied and Computational Mathematics
Supervisors
Examiners
Available from: 2015-08-30 Created: 2015-08-24 Last updated: 2015-08-30Bibliographically approved

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CiteExportLink to record
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