How Sensitive are Tail-Related Risk Measures in a Contamination Neighbourhood?

IRTG 1792 Discussion Paper No. 2018-010

26 Pages Posted: 30 Jul 2018

See all articles by Wolfgang Karl Härdle

Wolfgang Karl Härdle

Blockchain Research Center Humboldt-Universität zu Berlin; Charles University; National Yang Ming Chiao Tung University; Asian Competitiveness Institute

Chengxiu Ling

University of Lausanne, Department of Actuarial Science

Date Written: February 22, 2018

Abstract

Estimation or mis-specification errors in the portfolio loss distribution can have a considerable impact on risk measures. This paper investigates the sensitivity of tail-related risk measures including the Value-at-Risk, expected shortfall and the expectile-quantile transformation level in an epsilon-contamination neighbourhood. The findings give the different approximations via the tail heaviness of the contamination models and its contamination levels. Illustrating examples and an empirical study on the dynamic CRIX capturing and displaying the market movements are given.

Keywords: sensitivity, expected shortfall, expectile, Value-at-Risk, risk management, influence function, CRIX

JEL Classification: C13, G10, G31

Suggested Citation

Härdle, Wolfgang Karl and Ling, Chengxiu, How Sensitive are Tail-Related Risk Measures in a Contamination Neighbourhood? (February 22, 2018). IRTG 1792 Discussion Paper No. 2018-010, Available at SSRN: https://ssrn.com/abstract=3210570 or http://dx.doi.org/10.2139/ssrn.3210570

Wolfgang Karl Härdle (Contact Author)

Blockchain Research Center Humboldt-Universität zu Berlin ( email )

Unter den Linden 6
Berlin, D-10099
Germany

Charles University ( email )

Celetná 13
Dept Math Physics
Praha 1, 116 36
Czech Republic

National Yang Ming Chiao Tung University ( email )

No. 1001, Daxue Rd. East Dist.
Hsinchu City 300093
Taiwan

Asian Competitiveness Institute ( email )

Singapore

Chengxiu Ling

University of Lausanne, Department of Actuarial Science ( email )

Quartier Chambronne
Lausanne, Vaud CH-1015
Switzerland

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