Lambda Value at Risk and Regulatory Capital: A Dynamic Approach to Tail Risk

Risks

Cesario Mateus¹  Ilaria Peri²  Asmerilda Hitaj³ 

[1] Department of Accounting and Finance, University of Greenwich, Old Royal Naval College, Park Row, London SE10 9LS, UK;Department of Economics, Mathematics and Statistics, Birkbeck University of London, Malet St, Bloomsbury, London WC1E 7HX, UK;Department of Statistics and Quantitative Methods, University of Milan Bicocca, U7, Via Bicocca degli Arcimboldi 8, Milan 20126, Italy;

关键词: banking regulation;    financial risk management;    risk modelling;    value at risk;   

DOI  :  10.3390/risks6010017

来源: DOAJ

【 摘 要 】

This paper presents the first methodological proposal of estimation of the Λ V a R. Our approach is dynamic and calibrated to market extreme scenarios, incorporating the need of regulators and financial institutions in more sensitive risk measures. We also propose a simple backtesting methodology by extending the V a R hypothesis-testing framework. Hence, we test our Λ V a R proposals under extreme downward scenarios of the financial crisis and different assumptions on the profit and loss distribution. The findings show that our Λ V a R estimations are able to capture the tail risk and react to market fluctuations significantly faster than the V a R and expected shortfall. The backtesting exercise displays a higher level of accuracy for our Λ V a R estimations.

【 授权许可】

Unknown