Backtesting trading risk of commercial banks using expected shortfall

Wong, W. K. (2008) Backtesting trading risk of commercial banks using expected shortfall. Journal of Banking and Finance, 32 (7). pp. 1404-1415. ISSN 0378-4266

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Publisher's URL: http://dx.doi.org/10.1016/j.jbankfin.2007.11.012

Abstract

This paper uses saddlepoint technique to backtest the trading risk of commercial banks using expected shortfall. It is found that four out of six US commercial banks have excessive trading risks. Monte Carlo simulation studies show that the proposed backtest is very accurate and powerful even for small test samples. More importantly, risk managers can carry out the proposed backtest based on any number of exceptions, so that incorrect risk models can be promptly detected before any further huge losses are realized.

Item Type:Article
Uncontrolled Keywords:value-at-risk, expected shortfall, backtesting, saddlepoint technique
Faculty/Department:Faculty of Business and Law > Department of Business Management
~Pre-2010 Faculty Structure > Bristol Business School > Centre for Global Finance
~Pre-2012 Faculty Structure > Faculty of Business and Law > Department of Business and Management
~Pre-2012 Faculty Structure > Faculty of Business and Law > Centre for Global Finance
ID Code:12163
Deposited By: Dr W. Wong
Deposited On:06 Jan 2011 09:31
Last Modified:22 Nov 2012 15:43

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