More Accurate Measurement for Enhanced Controls: VaR vs ES?

Dominique Guegan (1) , Bertrand Hassani (1)

1 CES - Centre d'économie de la Sorbonne

This paper analyses how risks are measured in financial institutions, for instance Market, Credit, Operational, etc with respect to the choice of the risk measures, the choice of the distributions used to model them and the level of confidence selected. We discuss and illustrate the characteristics, the paradoxes and the issues observed comparing the Value-at-Risk and the Expected Shortfall in practice. This paper is built as a differential diagnosis and aims at discussing the reliability of the risk measures as long as making some recommendations.

Mots clés: Risk measures; Marginal distributions; Level of confidence; Capital requirement

Domaines: Economies et finances

Dominique Guegan, Bertrand Hassani. More Accurate Measurement for Enhanced Controls: VaR vs ES?. 2016. ⟨halshs-01281940⟩