Estimating Financial Risk Measures for Futures Positions: A Non-Parametric Approach

26 Pages Posted: 19 Jun 2007

See all articles by John Cotter

John Cotter

University College Dublin; University of California, Los Angeles (UCLA) - Anderson School of Management

Kevin Dowd

Nottingham University Business School (NUBS)

Date Written: 2006

Abstract

This paper presents non-parametric estimates of spectral risk measures applied to long and short positions in 5 prominent equity futures contracts. It also compares these to estimates of two popular alternative measures, the Value-at-Risk (VaR) and Expected Shortfall (ES). The spectral risk measures are conditioned on the coefficient of absolute risk aversion, and the latter two are conditioned on the confidence level. Our findings indicate that all risk measures increase dramatically and their estimators deteriorate in precision when their respective conditioning parameter increases. Results also suggest that estimates of spectral risk measures and their precision levels are of comparable orders of magnitude as those of more conventional risk measures.

Keywords: non-parametric, futures, risk measures

JEL Classification: G15

Suggested Citation

Cotter, John and Dowd, Kevin, Estimating Financial Risk Measures for Futures Positions: A Non-Parametric Approach (2006). Available at SSRN: https://ssrn.com/abstract=994523 or http://dx.doi.org/10.2139/ssrn.994523

John Cotter (Contact Author)

University College Dublin ( email )

School of Business, Carysfort Avenue
Blackrock, Co. Dublin
Ireland
353 1 716 8900 (Phone)
353 1 283 5482 (Fax)

HOME PAGE: http://www.ucd.ie/bankingfinance/staff/professorjohncotter/

University of California, Los Angeles (UCLA) - Anderson School of Management ( email )

110 Westwood Plaza
Los Angeles, CA 90095-1481
United States

Kevin Dowd

Nottingham University Business School (NUBS) ( email )

Jubilee Campus
Wollaton Road
Nottingham, NG8 1BB
United Kingdom

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