Exponential Spectral Risk Measures
University College Dublin; Anderson School of Management
Nottingham University Business School (NUBS)
Spectral risk measures are attractive risk measures as they allow the user to obtain risk measures that reflect their subjective risk-aversion. This paper examines spectral risk measures based on an exponential utility function, and finds that these risk measures have nice intuitive properties. It also discusses how they can be estimated using numerical quadrature methods, and how confidence intervals for them can be estimated using a parametric bootstrap. Illustrative results suggest that estimated exponential spectral risk measures obtained using such methods are quite precise in the presence of normally distributed losses.
Number of Pages in PDF File: 16
Keywords: spectral risk measures, risk aversion functions, exponential utility
JEL Classification: G15working papers series
Date posted: July 10, 2007
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