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- Title
Equivalent Risk Indicators: VaR, TCE, and Beyond.
- Authors
Faroni, Silvia; Le Courtois, Olivier; Ostaszewski, Krzysztof
- Abstract
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.
- Subjects
DISTRIBUTION (Probability theory); ECONOMIC indicators; QUANTILES; FINANCIAL institutions
- Publication
Risks, 2022, Vol 10, Issue 8, p142
- ISSN
2227-9091
- Publication type
Article
- DOI
10.3390/risks10080142