Measuring Expected Shortfall Under Semi-Parametric Expected Shortfall Approaches: A Case Study of Selected Southern European/Mediterranean Countries

34 Pages Posted: 1 Nov 2019

See all articles by Nikola Radivojevic

Nikola Radivojevic

Technical College of Applied Studies, Kragujevac

Borislav Bojic

University Business Academy, Novi Sad - Faculty of Law for Commerce and Judiciary in Novi Sad

Marija Lakicevic

University of Kragujevac - Faculty of Economics

Date Written: October 31, 2019

Abstract

We investigate the applicability of semi-parametric approaches for estimating expected shortfall. More precisely, we examine the applicability of several models based on the historical simulation (HS) approach: one based on untransformed historical data, and others based on transformed historical data. Our research shows that the HS models based on certain transformed historical data can reliably be used for the estimation of market risk in terms of the Basel III standards. This investigation was conducted on the capital markets of selected Southern European/Mediterranean countries and those of Serbia and Ireland. Our backtesting results were verified using Monte Carlo testing and the bootstrap method.

Keywords: expected shortfall (ES), emerging markets, Berkowitz test, Acerbi and Szekely’s first method, bootstrap methods, Mediterranean countries.

Suggested Citation

Radivojevic, Nikola and Bojic, Borislav and Lakicevic, Marija, Measuring Expected Shortfall Under Semi-Parametric Expected Shortfall Approaches: A Case Study of Selected Southern European/Mediterranean Countries (October 31, 2019). Journal of Operational Risk, Forthcoming. Available at SSRN: https://ssrn.com/abstract=3478577

Nikola Radivojevic (Contact Author)

Technical College of Applied Studies, Kragujevac ( email )

Косовска 8
Kragujevac, 34000
Serbia

Borislav Bojic

University Business Academy, Novi Sad - Faculty of Law for Commerce and Judiciary in Novi Sad ( email )

Geri Karolja 1
Novi Sad, 21000
Serbia

Marija Lakicevic

University of Kragujevac - Faculty of Economics ( email )

Djure Pucara Starog 3
Kragujevac, 34000
Serbia

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