Comparative Analyses of Expected Shortfall and Value-at-Risk: Their Estimation Error, Decomposition, and Optimization

We compare expected shortfall with value-at-risk (VaR) in three aspects: estimation errors, decomposition into risk factors, and optimization. We describe the advantages and the disadvantages of expected shortfall over VaR. We show that expected shortfall is easily decomposed and optimized while VaR is not. We also show that expected shortfall needs a larger size of sample than VaR for the same level of accuracy.

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Year of publication:	2002
Authors:	Yamai, Yasuhiro ; Yoshiba, Toshinao
Published in:	Monetary and Economic Studies. - Institute for Monetary and Economic Studies. - Vol. 20.2002, 1, p. 87-121
Publisher:	Institute for Monetary and Economic Studies

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Extent:	application/pdf
Type of publication:	Article
Language:	English
Classification:	G13 - Contingent Pricing; Futures Pricing ; G32 - Financing Policy; Capital and Ownership Structure ; D81 - Criteria for Decision-Making under Risk and Uncertainty ; G11 - Portfolio Choice
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10004971261