Scaling Conditional Tail Probability and Quantile Estimators

Abstract

A key issue for risk management in practice is to decide the relevant horizon associated with risk measurement. Many different horizons may be relevant from short (eg. daily) to long (eg. monthly) timeframes and the risk manager must be able to provide measures across a range of horizons.1 This article measures risk at different horizons using volatility forecasts at high frequency as inputs that are then scaled for longer horizons.

Keywords: Scaling, Value at Risk, extreme value theory, conditional risk

JEL Classification: G01, G1