Woon K. Wong
Backtesting trading risk of commercial banks using expected shortfall
Wong, Woon K.
Authors
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. © 2007 Elsevier B.V. All rights reserved.
Citation
Wong, W. K. (2008). Backtesting trading risk of commercial banks using expected shortfall. Journal of Banking and Finance, 32(7), 1404-1415. https://doi.org/10.1016/j.jbankfin.2007.11.012
Journal Article Type | Article |
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Publication Date | Jul 1, 2008 |
Journal | Journal of Banking and Finance |
Print ISSN | 0378-4266 |
Publisher | Elsevier |
Peer Reviewed | Peer Reviewed |
Volume | 32 |
Issue | 7 |
Pages | 1404-1415 |
DOI | https://doi.org/10.1016/j.jbankfin.2007.11.012 |
Keywords | value-at-risk, expected shortfall, backtesting, saddlepoint technique |
Public URL | https://uwe-repository.worktribe.com/output/1011561 |
Publisher URL | http://dx.doi.org/10.1016/j.jbankfin.2007.11.012 |