Timo Dimitriadis, Xiaochun Liu, Julie Schnaitmann
arXiv 15 Sep 2020 · Econometrics
arXiv:2009.07341 · PDF · DOI · OpenAlex · Extracted main text
We propose forecast encompassing tests for the Expected Shortfall (ES) jointly with the Value at Risk (VaR) based on flexible link (or combination) functions. Our setup allows testing encompassing for convex forecast combinations and for link functions which preclude crossings of the combined VaR and ES forecasts. As the tests based on these link functions involve parameters which are on the boundary of the parameter space under the null hypothesis, we derive and base our tests on nonstandard asymptotic theory on the boundary. Our simulation study shows that the encompassing tests based on our new link functions outperform tests based on unrestricted linear link functions for one-step and multi-step forecasts. We further illustrate the potential of the proposed tests in a real data analysis for forecasting VaR and ES of the S&P 500 index.
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The works this paper leans on most, across its whole bibliography — not restricted to papers in our corpus. Ranked by composite intensity, which combines how often a work is mentioned, how many sections mention it, and how much of that falls in the main text rather than the appendix.
| Reference | Intensity | Mentions | Sections | Main text | |
|---|---|---|---|---|---|
| 1 | Giacomini, R. and Komunjer, I (2005) Evaluation and combination of conditional quantile forecasts | 1.000 | 10 | 4 | 100% |
| 2 | Basel Committee (2019) Minimum capital requirements for Market Risk | 1.000 | 9 | 4 | 100% |
| 3 | Basel Committee (2020) MAR - Calculation of RWA for Market Risk | 1.000 | 5 | 3 | 100% |
| 4 | Dimitriadis, T. and Schnaitmann, J (2020) Forecast Encompassing Tests for the Expected Shortfall self | 0.986 | 24 | 6 | 96% |
| 5 | Fissler, T. and Ziegel, J. F (2016) Higher order elicitability and Osband's principle | 0.928 | 5 | 3 | 80% |
| 6 | Taylor, J. W (2020) Forecast combinations for value at risk and expected shortfall | 0.928 | 4 | 4 | 100% |
| 7 | Patton, A. J., Ziegel, J. F., and Chen, R (2019) Dynamic semiparametric models for expected shortfall (and value-at-risk) | 0.901 | 26 | 9 | 73% |
| 8 | Dimitriadis, T. and Bayer, S (2019) A joint quantile and expected shortfall regression framework self | 0.894 | 21 | 6 | 71% |
| 9 | Taylor, J. W (2019) Forecasting value at risk and expected shortfall using a semiparametric approach based on the asymmetric laplace distribution | 0.874 | 12 | 5 | 67% |
| 10 | Andrews, D. W. K (1991) Heteroskedasticity and Autocorrelation Consistent Covariance Matrix Estimation | 0.843 | 4 | 3 | 75% |
Showing the top 10 of 86 scored citations.