Cookies?
Library Header Image
LSE Research Online LSE Library Services

Why risk is so hard to measure

Danielsson, Jon and Zhou, Chen (2015) Why risk is so hard to measure. SRC Discussion Paper, No 36. Systematic Risk Centre, The London School of Economics and Political Science, London, UK.

[img]
Preview
PDF
Download (662kB) | Preview

Abstract

This paper analyzes the robustness of standard risk analysis techniques, with a special emphasis on the specifications in Basel III. We focus on the difference between Value– at–Risk and expected shortfall, the small sample properties of these risk measures and the impact of using an overlapping approach to construct data for longer holding periods. Overall, risk forecasts are extremely uncertain at low sample sizes. By comparing the estimation uncertainty, we find that Value–at–Risk is superior to expected shortfall and the time-scaling approach for risk forecasts with longer holding periods is preferable to using overlapping data.

Item Type: Monograph (Discussion Paper)
Official URL: http://www.systemicrisk.ac.uk
Additional Information: © 2015 The Authors
Subjects: H Social Sciences > HB Economic Theory
JEL classification: C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods: General > C10 - General
C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods: General > C15 - Statistical Simulation Methods; Monte Carlo Methods; Bootstrap Methods
G - Financial Economics > G1 - General Financial Markets > G18 - Government Policy and Regulation
Sets: Research centres and groups > Systemic Risk Centre
Date Deposited: 19 May 2015 10:33
Last Modified: 19 Jan 2016 11:29
Projects: ES/K002309/1
Funders: Economic and Social Research Council
URI: http://eprints.lse.ac.uk/id/eprint/62002

Actions (login required)

View Item View Item

Downloads

Downloads per month over past year

View more statistics