Spectral risk measures with an application to futures clearinghouse variation margin requirements

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Title: Spectral risk measures with an application to futures clearinghouse variation margin requirements
Authors: Cotter, John
Dowd, Kevin
Permanent link: http://hdl.handle.net/10197/1189
Date: 31-Oct-2006
Abstract: This paper applies an AR(1)-GARCH (1, 1) process to detail the conditional distributions of the return distributions for the S&P500, FT100, DAX, Hang Seng, and Nikkei225 futures contracts. It then uses the conditional distribution for these contracts to estimate spectral risk measures, which are coherent risk measures that reflect a user’s risk-aversion function. It compares these to more familiar VaR and Expected Shortfall (ES) measures of risk, and also compares the precision and discusses the relative usefulness of each of these risk measures in setting variation margins that incorporate time-varying market conditions. The goodness of fit of the model is confirmed by a variety of backtests.
Funding Details: University College Dublin. School of Business
Type of material: Working Paper
Publisher: University College Dublin. School of Business. Centre for Financial Markets
University College Dublin. School of Business
Series/Report no.: Centre for Financial Markets working paper series; WP-07-02; UCD Business Schools Working Paper Series; WP09/03
Copyright (published version): 2006, Centre for Financial Markets
Keywords: Spectral risk measuresExpected shortfallValue at riskGARCHClearinghouse
Subject LCSH: Clearinghouses (Banking)
Extreme value theory
Risk--Econometric models
Other versions: http://www.ucd.ie/bankingfinance/docs/wp/cotter%20dowd%20wp%2007%2002.PDF
Language: en
Status of Item: Not peer reviewed
Appears in Collections:Centre for Financial Markets Working Papers

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