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Assessing financial model risk

Barrieu, Pauline and Scandolo, Giacomo (2014) Assessing financial model risk. European Journal of Operational Research, 242 (2). pp. 546-556. ISSN 0377-2217

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Identification Number: 10.1016/j.ejor.2014.10.032

Abstract

Model risk has a huge impact on any risk measurement procedure and its quantification is therefore a crucial step. In this paper, we introduce three quantitative measures of model risk when choosing a particular reference model within a given class: the absolute measure of model risk, the relative measure of model risk and the local measure of model risk. Each of the measures has a specific purpose and so allows for flexibility. We illustrate the various notions by studying some relevant examples, so as to emphasize the practicability and tractability of our approach.

Item Type: Article
Official URL: http://www.sciencedirect.com/science/journal/03772...
Additional Information: © 2014 Elsevier B.V
Divisions: Statistics
Centre for Analysis of Time Series
Subjects: H Social Sciences > HG Finance
Sets: Departments > Statistics
Research centres and groups > Centre for the Analysis of Time Series (CATS)
Research centres and groups > Risk and Stochastics Group
Date Deposited: 06 Nov 2014 12:26
Last Modified: 20 Sep 2019 01:54
Funders: STICERD, LSE
URI: http://eprints.lse.ac.uk/id/eprint/60084

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