Extreme Value at Risk and Expected Shortfall during Financial Crisis

L. Kourouma (1) , Denis Dupré (1) , G. Sanfilippo (1) , O. Taramasco (1)

1 CERAG - Centre d'études et de recherches appliquées à la gestion

This paper investigates Value at Risk and Expected Shortfall for CAC 40, S&P 500, Wheat and Crude Oil indexes during the 2008 financial crisis. We show an underestimation of the risk of loss for the unconditional VaR models as compared with the conditional models. This underestimation is stronger using the historical VaR approach than when using the extreme values theory VaR model. Even in 2008 financial crisis, the conditional EVT model is more accurate and reliable for predicting the asset risk losses. Banks have no interest in using it because the Basel II agreement penalizes banks using accuracy models like the conditional EVT model, and this is the case for the assets being studied in this paper.

Mots clés: Market risk; Value at Risk; EVT; GARCH; Financial crisis; Basel requirements

Domaines: Gestion et management

L. Kourouma, Denis Dupré, G. Sanfilippo, O. Taramasco. Extreme Value at Risk and Expected Shortfall during Financial Crisis. 2011. ⟨halshs-00658495⟩