Why risk is so hard to measure

   Daníelsson, J. and C. Zhou (2015, December). Why risk is so hard to measure. Systemic Risk Centre discussion paper 36. London School of Economics.

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This paper analyzes the robustness of standard techniques for risk analysis, with a special emphasis on the Basel III risk measures. We focus on the difference between value--at--risk and expected shortfall, the small sample properties of these risk measures and the impact of using an overlapping approach to construct data for longer holding periods. Overall, we find that risk forecasts are extremely uncertain at low sample sizes. By comparing the estimation uncertainty, we find that value--at--risk is superior to expected shortfall and the time-scaling approach for risk forecasts with longer holding periods is preferable to using overlapping data.

@MISC{DanielssonZhou2015,
 author =  {J{\'o}n Dan{\'\i}elsson and Chen Zhou},
 title =   {Why risk is so hard to measure},
 year =    2015,
 note =    {Systemic Risk Centre discussion paper 36. London School
                 of Economics},
 url =     {RiskResearch.org},
}