Equivalent Risk Indicators: VaR, TCE, and Beyond
While a lot of research concentrates on the respective merits of VaR and TCE, which are the two most classic risk indicators used by financial institutions, little has been written on the equivalence between such indicators. Further, TCE, despite its merits, may not be the most accurate indicator to...
| Main Authors: | , , |
|---|---|
| Format: | Article |
| Language: | English |
| Published: |
MDPI AG
2022-07-01
|
| Series: | Risks |
| Subjects: | |
| Online Access: | https://www.mdpi.com/2227-9091/10/8/142 |
| _version_ | 1797408108146851840 |
|---|---|
| author | Silvia Faroni Olivier Le Courtois Krzysztof Ostaszewski |
| author_facet | Silvia Faroni Olivier Le Courtois Krzysztof Ostaszewski |
| author_sort | Silvia Faroni |
| collection | DOAJ |
| description | While a lot of research concentrates on the respective merits of VaR and TCE, which are the two most classic risk indicators used by financial institutions, little has been written on the equivalence between such indicators. Further, TCE, despite its merits, may not be the most accurate indicator to take into account the nature of probability distribution tails. In this paper, we introduce a new risk indicator that extends TCE to take into account higher-order risks. We compare the quantiles of this indicator to the quantiles of VaR in a simple Pareto framework, and then in a generalized Pareto framework. We also examine equivalence results between the quantiles of high-order TCEs. |
| first_indexed | 2024-03-09T03:53:35Z |
| format | Article |
| id | doaj.art-8b5b79a269d649ad91807e932c80ef29 |
| institution | Directory Open Access Journal |
| issn | 2227-9091 |
| language | English |
| last_indexed | 2024-03-09T03:53:35Z |
| publishDate | 2022-07-01 |
| publisher | MDPI AG |
| record_format | Article |
| series | Risks |
| spelling | doaj.art-8b5b79a269d649ad91807e932c80ef292023-12-03T14:23:49ZengMDPI AGRisks2227-90912022-07-0110814210.3390/risks10080142Equivalent Risk Indicators: VaR, TCE, and BeyondSilvia Faroni0Olivier Le Courtois1Krzysztof Ostaszewski2EMLyon Business School, 23, Avenue Guy de Collongue, CEDEX, 69134 Ecully, FranceEMLyon Business School, 23, Avenue Guy de Collongue, CEDEX, 69134 Ecully, FranceCollege of Arts and Science, Illinois State University (ISU), Normal, IL 61790-4520, USAWhile a lot of research concentrates on the respective merits of VaR and TCE, which are the two most classic risk indicators used by financial institutions, little has been written on the equivalence between such indicators. Further, TCE, despite its merits, may not be the most accurate indicator to take into account the nature of probability distribution tails. In this paper, we introduce a new risk indicator that extends TCE to take into account higher-order risks. We compare the quantiles of this indicator to the quantiles of VaR in a simple Pareto framework, and then in a generalized Pareto framework. We also examine equivalence results between the quantiles of high-order TCEs.https://www.mdpi.com/2227-9091/10/8/142VaRTCEextended TCEinsurance regulationrisk measurement |
| spellingShingle | Silvia Faroni Olivier Le Courtois Krzysztof Ostaszewski Equivalent Risk Indicators: VaR, TCE, and Beyond Risks VaR TCE extended TCE insurance regulation risk measurement |
| title | Equivalent Risk Indicators: VaR, TCE, and Beyond |
| title_full | Equivalent Risk Indicators: VaR, TCE, and Beyond |
| title_fullStr | Equivalent Risk Indicators: VaR, TCE, and Beyond |
| title_full_unstemmed | Equivalent Risk Indicators: VaR, TCE, and Beyond |
| title_short | Equivalent Risk Indicators: VaR, TCE, and Beyond |
| title_sort | equivalent risk indicators var tce and beyond |
| topic | VaR TCE extended TCE insurance regulation risk measurement |
| url | https://www.mdpi.com/2227-9091/10/8/142 |
| work_keys_str_mv | AT silviafaroni equivalentriskindicatorsvartceandbeyond AT olivierlecourtois equivalentriskindicatorsvartceandbeyond AT krzysztofostaszewski equivalentriskindicatorsvartceandbeyond |