A Confidence Interval Procedure for Expected Shortfall Risk Measurement via Two-Level Simulation
Hai Lan, Barry L. Nelson, Jeremy Staum
Operations Research · 2010 · Volume 58 · Issue 5
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.
Keywords
conditional value-at-risk, worst conditional expectation, tail conditional expectation, conditional tail expectation, expected shortfall, empirical likelihood, two-level simulation, simulation, design of experiments, two-level simulation, simulation, efficiency, screening methods, finance, portfolio, risk management
Enable JavaScript for citation tools and additional paper interactions.