Backtesting trading risk of commercial banks using expected shortfall

Wong, Woon K. ORCID: https://orcid.org/0000-0001-6892-9965 2008. Backtesting trading risk of commercial banks using expected shortfall. Journal of Banking & Finance 32 (7) , pp. 1404-1415. 10.1016/j.jbankfin.2007.11.012

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Abstract

This paper uses saddlepoint technique to backtest the trading risk of commercial banks using expected shortfall. It is found that four out of six US commercial banks have excessive trading risks. Monte Carlo simulation studies show that the proposed backtest is very accurate and powerful even for small test samples. More importantly, risk managers can carry out the proposed backtest based on any number of exceptions, so that incorrect risk models can be promptly detected before any further huge losses are realized.

Item Type:	Article
Date Type:	Publication
Status:	Published
Schools:	Business (Including Economics)
Subjects:	H Social Sciences > HF Commerce
Uncontrolled Keywords:	Value-at-Risk; Expected shortfall; Backtesting; Saddlepoint technique
Publisher:	Elsevier
ISSN:	0378-4266
Last Modified:	24 Oct 2022 11:41
URI:	https://orca.cardiff.ac.uk/id/eprint/49025

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