Generalized Quantiles as Risk Measures

23 Pages Posted: 2 Mar 2013 Last revised: 15 Aug 2013

See all articles by Fabio Bellini

Fabio Bellini

University of Milano Bicocca - Dipartimento di Statistica e Metodi Quantitativi

Bernhard Klar

Karlsruhe Institute of Technology

Alfred Müller

University of Siegen

Emanuela Rosazza Gianin

University of Milano-Bicocca - Dip. di Statistica e Metodi Quantitativi

Date Written: August 15, 2013

Abstract

In the statistical and actuarial literature several generalizations of quantiles have been considered, by means of the minimization of a suitable asymmetric loss function. All these generalized quantiles share the important property of elicitability, that is recently receiving a lot of attention since it corresponds to the existence of a natural backtesting methodology. In this paper we investigate the case of M-quantiles, defined as the minimizers of an asymmetric convex loss function, in contrast to Orlicz quantiles, that have been considered in Bellini and Rosazza Gianin (2012). We discuss their properties as risk measures and point out the connection with the zero utility premium principle and with shortfall risk measures introduced by Follmer and Schied (2002). In particular, we show that the only M-quantiles that are coherent risk measures are the expectiles, introduced by Newey and Powell (1987) as the minimizers of an asymmetric quadratic loss function. We provide their dual and Kusuoka representations and discuss their relationship with CVaR. We analyze their asymptotic properties and show that for very heavy tailed distributions expectiles are more conservative than the usual quantiles. Finally, we show their robustness in the sense of lipschitzianity with respect to the Wasserstein metric.

Keywords: expectile, coherence, elicitability, Kusuoka representation, robustness

Suggested Citation

Bellini, Fabio and Klar, Bernhard and Müller, Alfred and Rosazza Gianin, Emanuela, Generalized Quantiles as Risk Measures (August 15, 2013). Available at SSRN: https://ssrn.com/abstract=2225751 or http://dx.doi.org/10.2139/ssrn.2225751

Fabio Bellini

University of Milano Bicocca - Dipartimento di Statistica e Metodi Quantitativi ( email )

Milano, Milan
Italy

Bernhard Klar

Karlsruhe Institute of Technology ( email )

Alfred Müller (Contact Author)

University of Siegen ( email )

Department Mathematik
Walter-Flex-Str. 3
57068 Siegen
Germany

Emanuela Rosazza Gianin

University of Milano-Bicocca - Dip. di Statistica e Metodi Quantitativi ( email )

Milan
Italy

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