In this paper we present a framework for backtesting all currently popular risk measurement methods (including value-at-risk and expected shortfall) using the functional delta method.Estimation risk can be taken explicitly into account.Based on a simulation study we provide evidence that tests for expected shortfall with acceptable low levels have a better performance than tests for value-at-risk in realistic financial sample sizes.We propose a way to determine multiplication factors, and find that the resulting regulatory capital scheme using expected shortfall compares favorably to the current Basle Accord backtesting scheme.
Original language | English |
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Place of Publication | Tilburg |
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Publisher | Finance |
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Number of pages | 31 |
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Volume | 2002-110 |
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Publication status | Published - 2002 |
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Name | CentER Discussion Paper |
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Volume | 2002-110 |
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