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    Lambda value at risk and regulatory capital: a dynamic approach to tail risk

    Hitaj, A. and Mateus, C. and Peri, Ilaria (2018) Lambda value at risk and regulatory capital: a dynamic approach to tail risk. Risks 6 (1), p. 17. ISSN 2227-9091.

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    This paper presents the first methodological proposal of estimation of the ΛVaR . Our approach is dynamic and calibrated to market extreme scenarios, incorporating the need of regulators and financial institutions in more sensitive risk measures. We also propose a simple backtesting methodology by extending the VaR hypothesis-testing framework. Hence, we test our ΛVaR proposals under extreme downward scenarios of the financial crisis and different assumptions on the profit and loss distribution. The findings show that our ΛVaR estimations are able to capture the tail risk and react to market fluctuations significantly faster than the VaR and expected shortfall. The backtesting exercise displays a higher level of accuracy for our ΛVaR estimations.


    Item Type: Article
    Keyword(s) / Subject(s): banking regulation, financial risk management, risk modelling, value at risk
    School: School of Business, Economics & Informatics > Economics, Mathematics and Statistics
    Depositing User: Administrator
    Date Deposited: 20 Mar 2018 13:55
    Last Modified: 18 Jun 2021 00:46


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