Related papers: Elicitability and backtesting: Perspectives for ba…
We study a class of backtests for forecast distributions in which the test statistic depends on a spectral transformation that weights exceedance events by a function of the modeled probability level. The weighting scheme is specified by a…
We introduce new forecast encompassing tests for the risk measure Expected Shortfall (ES). The ES currently receives much attention through its introduction into the Basel III Accords, which stipulate its use as the primary market risk…
Systemic risk measures have been shown to be predictive of financial crises and declines in real activity. Thus, forecasting them is of major importance in finance and economics. In this paper, we propose a new forecasting method for…
We introduce a novel class of systemic risk measures, the Vulnerability Conditional risk measures, which try to capture the "tail risk" of a risky position in scenarios where one or more market participants is experiencing financial…
We consider the problem of governing systemic risk in a banking system model. The banking system model consists in an initial value problem for a system of stochastic differential equations whose dependent variables are the log-monetary…
We address the problem that classical risk measures may not detect the tail risk adequately. This can occur for instance due to averaging when calculating the Expected Shortfall. The current literature proposes the so-called adjusted…
Since the Great Financial Crisis (GFC), the use of stress tests as a tool for assessing the resilience of financial institutions to adverse financial and economic developments has increased significantly. One key part in such exercises is…
A risk analyst assesses potential financial losses based on multiple sources of information. Often, the assessment does not only depend on the specification of the loss random variable but also various economic scenarios. Motivated by this…
We discuss equivalent axiomatic characterizations of distortion risk measures, and give a novel and concise proof of the characterization of elicitable distortion risk measures. Elicitability has recently been discussed as a desirable…
A statistical test based on the geometric mean is proposed to determine if a predictive model should be rejected or not, when the quantity of interest is a strictly positive continuous random variable. A simulation study is performed to…
Financial institutions have to allocate so-called "economic capital" in order to guarantee solvency to their clients and counter parties. Mathematically speaking, any methodology of allocating capital is a "risk measure", i.e. a function…
The purpose of this paper is to describe and extend the use of the newly-introduced measure, residual estimation risk. Following the seminal work of Bignozzi and Tsanakas, the quantification of residual estimation risk is proposed in a…
This paper introduces novel backtests for the risk measure Expected Shortfall (ES) following the testing idea of Mincer and Zarnowitz (1969). Estimating a regression framework for the ES stand-alone is infeasible, and thus, our tests are…
Tail risk measures are fully determined by the distribution of the underlying loss beyond its quantile at a certain level, with Value-at-Risk, Expected Shortfall and Range Value-at-Risk being prime examples. They are induced by law-based…
We propose a dynamical model for the estimation of Operational Risk in banking institutions. Operational Risk is the risk that a financial loss occurs as the result of failed processes. Examples of operational losses are the ones generated…
A method for conducting Bayesian elicitation and learning in risk assessment is presented. It assumes that the risk process can be described as a fault tree. This is viewed as a belief network, for which prior distributions on primary event…
We provide a constructive way of defining new elicitable risk measures that are characterised by a multiplicative scoring function. We show that depending on the choice of the scoring function's components, the resulting risk measure…
Prescriptive process monitoring methods seek to improve the performance of a process by selectively triggering interventions at runtime (e.g., offering a discount to a customer) to increase the probability of a desired case outcome (e.g., a…
Informally, a risk measure is said to be elicitable if there exists a suitable scoring function such that minimizing its expected value recovers the risk measure. In this paper, we analyze the elicitability properties of the class of return…
We introduce two kinds of risk measures with respect to some reference probability measure, which both allow for a certain order structure and domination property. Analyzing their relation to each other leads to the question when a certain…