Internal vs. External Risk Measures: How Capital Requirements Differ in Practice
Journal
Operations Research Letters
ISSN
0167-6377
ISSN-Digital
1872-7468
Type
journal article
Date Issued
2010-09-01
Author(s)
Abstract
We compare capital requirements derived from tail conditional expectation (TCE) with those derived from the tail conditional median (TCM). In theory, TCE is higher than TCM for most distributions commonly used in finance and at fixed confidence levels; however, we find that in empirical data, there is no clear-cut relationship between the two. Our results highlight the relevance of TCM as a robust alternative to TCE, especially for regulatory control.
Language
English
Keywords
Risk measures
Tail conditional expectation
Tail conditional median
Value-at-risk
Robust statistics
HSG Classification
contribution to scientific community
Refereed
Yes
Publisher
Elsevier
Publisher place
Amsterdam
Volume
38
Number
5
Start page
482
End page
488
Pages
7
Subject(s)
Division(s)
Eprints ID
206703