Extreme spectral risk measures : an application to futures clearinghouse margin requirements

This paper applies the Extreme-Value (EV) Generalised Pareto distribution to the
extreme tails of the return distributions for the S&P500, FT100, DAX, Hang Seng,
and Nikkei225 futures contracts. It then uses tail estimators from these contracts to
estimate spectral risk measures, which are coherent risk measures that reflect a user’s
risk-aversion function. It compares these to VaR and Expected Shortfall (ES) risk
measures, and compares the precision of their estimators. It also discusses the
usefulness of these risk measures in the context of clearinghouses setting initial
margin requirements, and compares these to the SPAN measures typically used.