A confidence interval procedure for expected shortfall risk measurement via two-level simulation

Hai Lan*, Barry L. Nelson, Jeremy Staum

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

24 Scopus citations

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 languageEnglish (US)
Pages (from-to)1481-1490
Number of pages10
JournalOperations Research
Volume58
Issue number5
DOIs
StatePublished - Sep 1 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

Fingerprint Dive into the research topics of 'A confidence interval procedure for expected shortfall risk measurement via two-level simulation'. Together they form a unique fingerprint.

Cite this