Expected Shortfall, spectral risk measures, and the aggravating effect of background risk, or: risk vulnerability and the problem of subadditivity

Brandtner, Mario

doi:10.1016/j.jbankfin.2018.02.002

Cited by 6 publications

(3 citation statements)

References 34 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…However, practical decisions resulting from the use of these axiomatic risk measures may contradict economic intuition or well-established empirical patterns. For example, risk-averse individuals, when utilizing the most prominent axiomatic risk measure of Conditional Value-at-Risk (Acerbi and Tasche 2002), may violate (Brandtner 2013) the empirical paradigm of diversification in portfolio selection (Koumou 2018;Markowitz 1952), increase risk exposure even though their risk aversion is expected to rise (Brandtner and Kürsten 2015), or expand risky investment though the threat of some additional background risk looms (Brandtner 2018). In any of these behavioral inconsistencies between theoretical and observed patterns, there is the need for ongoing data collection and…”

Section: Suggestions and Future Developmentsmentioning

confidence: 99%

Qualitative research: extending the range with flexible pattern matching

et al. 2021

View full text Add to dashboard Cite

The flexible pattern matching approach has witnessed increasing popularity. By combining deduction with induction in logic, flexible pattern matching is well suited for exploration and theory development. The paper discusses its logic, advantages and process of this approach while offering a review of research adopting this approach. We also compare and contrast it with another popular qualitative data analysis technique, the grounded theory approach, to further ground the method on the established knowledge and elaborate its strength and fitting context. This paper advances the flexible pattern matching approach by suggesting a five-step roadmap to conduct qualitative research with the approach.

show abstract

Section: Suggestions and Future Developmentsmentioning

confidence: 99%

Qualitative research: extending the range with flexible pattern matching

et al. 2021

View full text Add to dashboard Cite

show abstract

“…The evolution of risk management is induced by financial crises (Adrian, 2017). Special attention is given for measuring market risk (Brandtner, 2018;Ramponi, & Campi, 2017;Asimit & Li, 2016;Ouyang, 2009) and the necessity of volatility forecasting (Degiannakis, 2017;Zikes & Barunik, 2014), while recognizing investment and competitive environment (Prorokowski, 2016;Zukauskas, & Neverauskas, 2008). The practical implications are particularly significant in terms of analyzing the possibility of applying different VaR models, with ever-present challenges in determining an adequate level of reliability and an observation time interval.…”

Section: Literature Reviewmentioning

confidence: 99%

Investment Environment Problems Analysis and Evaluation: An Ex Post Empirical Analysis and Performance Implications

Djakovic

Andjelic

Petkovic³

2019

View full text Add to dashboard Cite

The research subject is the investment environment problems analysis and evaluation of the developing countries, namely, the Republic of Serbia, Croatia, Slovenia, and Hungary. The analysis was carried out by testing and implementation of the Value-at-Risk models, i.e, the historical simulation (HS VaR), the delta-normal VaR (D VaR) and the extreme value theory model (EVT), with the confidence level of 95% for 100, 200 and 300 days, in the period from 2012 to 2016. The basic hypothesis of the research is that there is a relation between the successful application of the historical simulation (HS VaR), the delta-normal VaR (D VaR) and the extreme value theory model (EVT) and the conditions and opportunities of the investment environment of the developing countries. The research results provide a concrete knowledge of the conditions and circumstances of the investment environment in the observed markets, with a simultaneous performance assessment of the tested VaR models.

show abstract

“…They then introduce a regulator's condition that balances shortfall risk against the capital costs of the banks, and investigate which risk measure then gives the optimal capital requirement. Recently, Brandtner (2018) has shown that the subadditivity of spectral risk measures implies risk vulnerability. He concludes that if a bank is confronted with increased default risks in its banking book due to an economic downturn, it might at the same time be induced to take more risk in its trading book 9 .…”

mentioning

confidence: 99%

Bigger Is Not Always Safer: A Critical Analysis of the Subadditivity Assumption for Coherent Risk Measures

Rau-Bredow

2019

Risks

View full text Add to dashboard Cite

This paper provides a critical analysis of the subadditivity axiom, which is the key condition for coherent risk measures. Contrary to the subadditivity assumption, bank mergers can create extra risk. We begin with an analysis how a merger affects depositors, junior or senior bank creditors, and bank owners. Next it is shown that bank mergers can result in higher payouts having to be made by the deposit insurance scheme. Finally, we demonstrate that if banks are interconnected via interbank loans, a bank merger could lead to additional contagion risks. We conclude that the subadditivity assumption should be rejected, since a subadditive risk measure, by definition, cannot account for such increased risks.

show abstract

Expected Shortfall, spectral risk measures, and the aggravating effect of background risk, or: risk vulnerability and the problem of subadditivity

Cited by 6 publications

References 34 publications

Qualitative research: extending the range with flexible pattern matching

Qualitative research: extending the range with flexible pattern matching

Investment Environment Problems Analysis and Evaluation: An Ex Post Empirical Analysis and Performance Implications

Bigger Is Not Always Safer: A Critical Analysis of the Subadditivity Assumption for Coherent Risk Measures

Contact Info

Product

Resources

About