Abstract
We develop and evaluate a two-level simulation procedure that produces a confidence interval for expected shortfall. The outer level of simulation generates financial scenarios, whereas the inner level estimates expected loss conditional on each scenario. Our procedure uses the statistical theory of empirical likelihood to construct a confidence interval. It also uses tools from the ranking-and-selection literature to make the simulation efficient.
| Original language | English (US) |
|---|---|
| Pages (from-to) | 1481-1490 |
| Number of pages | 10 |
| Journal | Operations Research |
| Volume | 58 |
| Issue number | 5 |
| DOIs | |
| State | Published - Sep 2010 |
Keywords
- Conditional tail expectation
- Conditional value-at-risk
- Design of experiments: two-level simulation
- Efficiency: screening methods
- Empirical likelihood
- Expected shortfall
- Finance
- Portfolio: risk management
- Simulation
- Tail conditional expectation
- Two-level simulation
- Worst conditional expectation
ASJC Scopus subject areas
- Computer Science Applications
- Management Science and Operations Research