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Volume 6
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Article

A Simple Traffic Light Approach to Backtesting Expected Shortfall

by
Nick Costanzino
1,2,* and
Michael Curran
3,*
1
Barclays Capital, 745 7th Ave, New York, NY 10019, USA
2
Department of Finance and Risk Engineering, NYU Tandon School of Engineering, New York, NY 11201, USA
3
Riskcare, New York, NY 10018, USA
*
Authors to whom correspondence should be addressed.
Risks 2018, 6(1), 2; https://doi.org/10.3390/risks6010002
Submission received: 11 September 2017 / Revised: 3 January 2018 / Accepted: 4 January 2018 / Published: 9 January 2018
Versions Notes

Abstract

We propose a Traffic Light approach to backtesting Expected Shortfall which is completely consistent with, and analogous to, the Traffic Light approach to backtesting VaR (Value at Risk) initially proposed by the Basel Committee on Banking Supervision in their 1996 consultative document Basle Committee on Banking Supervision (1996). The approach relies on the generalized coverage test for Expected Shortfall developed in Costanzino and Curran (2015).
Keywords: Expected Shortfall; backtesting; Fundamental Review of the Trading Book Expected Shortfall; backtesting; Fundamental Review of the Trading Book

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MDPI and ACS Style

Costanzino, N.; Curran, M. A Simple Traffic Light Approach to Backtesting Expected Shortfall. Risks 2018, 6, 2. https://doi.org/10.3390/risks6010002

AMA Style

Costanzino N, Curran M. A Simple Traffic Light Approach to Backtesting Expected Shortfall. Risks. 2018; 6(1):2. https://doi.org/10.3390/risks6010002

Chicago/Turabian Style

Costanzino, Nick, and Michael Curran. 2018. "A Simple Traffic Light Approach to Backtesting Expected Shortfall" Risks 6, no. 1: 2. https://doi.org/10.3390/risks6010002

APA Style

Costanzino, N., & Curran, M. (2018). A Simple Traffic Light Approach to Backtesting Expected Shortfall. Risks, 6(1), 2. https://doi.org/10.3390/risks6010002

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