SUITABLE RISK MEASUREMENT OF CHINESE STOCK MARKET IN HIGH VOLATILITY PERIODS
Journal Title: Topics in Economics, Business and Management (EBM) - Year 2018, Vol 2, Issue 1
Abstract
Chinese economy nowadays receives impacts from various economic activities internationally and accordingly the risk measurement and management system is worthy of discussion. In the past two decades, the VaR and ES have been widely introduced and discussed. However, in a recent consultative document, the Basel Committee on Banking Supervision suggests replacing Value-at-Risk (VaR) by expected shortfall (ES) for setting capital requirements for banks’ trading books because ES better captures tail risk than VaR. However, besides ES, another risk measure called median shortfall (MS) also captures tail risk by taking into account both the size and likelihood of losses. The study argues that MS is a better alternative than ES as a risk measure for setting capital requirements in China because: (1) MS is elicitable but ES is not; (2) MS has distributional robustness with respect to model misspecification but ES does not; (3) MS is easy to implement but ES is not.
Authors and Affiliations
Feitong Liu
Keywords
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- EP ID EP411970
- DOI 10.26480/icefs.01.2018.06.12
- Views 75
- Downloads 0
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