This study introduces the dynamic Gerber model (DGC) and evaluates its perfor mance in the prediction of Value at Risk (VaR) and Expected Shortfall (ES) compared to alternative parametric, non-parametric and semi-parametric methods for estimating the covariance matrix of returns. Based on ES backtests, the DGC method produces, overall, accurate ES forecasts. Furthermore, we use the Model Confidence Set proce dure to identify the superior set of models (SSM). For all the portfolios and VaR/ES confi dence levels we consider, the DGC is found to belong to the SSM.

A novel robust method for estimating the covariance matrix of financial returns with applications to risk management

Leccadito, Arturo
;
Staino, Alessandro;Toscano, Pietro
2024-01-01

Abstract

This study introduces the dynamic Gerber model (DGC) and evaluates its perfor mance in the prediction of Value at Risk (VaR) and Expected Shortfall (ES) compared to alternative parametric, non-parametric and semi-parametric methods for estimating the covariance matrix of returns. Based on ES backtests, the DGC method produces, overall, accurate ES forecasts. Furthermore, we use the Model Confidence Set proce dure to identify the superior set of models (SSM). For all the portfolios and VaR/ES confi dence levels we consider, the DGC is found to belong to the SSM.
2024
Value at risk, Expected shortfall, Gerber statistic, Model confidence set, Superior set of models
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/20.500.11770/370637
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