Matinale Institut Europlace de Finance / Fondation Banque de France


À l’occasion de la conférence organisée par l’Institut Europlace de Finance et la Fondation Banque de France, Jean-Michel ZAKOIAN (ENSAE-CREST) et Olivier SCAILLET (Université de Genève & Swiss Finance Institute) viendront présenter leurs travaux de recherche :


« Estimating the Conditional Value-at-Risk and Expected-Shortfall »,


« Backtesting Systemic Risk Measures »,  
Olivier SCAILLET (Université de Genève & Swiss Finance Institute)


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Biography Jean-Michel ZAKOIAN:

Jean-Michel Zakoian is director of the Finance-Insurance laboratory at CREST and professor of applied mathematics at Lille University and ENSAE. He is associate editor at Econometric Theory and Journal of Time Series Analysis, and has co-authored a book on GARCH models. His main research interests include financial and time series econometrics. In these areas, his current research focuses on risk estimation in the framework of dynamic portfolios, and the modeling of bubbles by non causal processes.


This talk surveys recent researches devoted to the estimation of the conditional VaR and ES in a dynamic framework.

Conditional risk measures are tools introduced for evaluating the market risk which takes into account the information

brought by  the past observations at the current date. Estimation of the underlying dynamics of the risk factors entails an additional risk, called estimation risk, which has to be taken into account for setting reserves. We compare different approaches for jointly evaluating the market and estimation risks for  general classes of univariate and multivariate dynamic models. The results are illustrated on simulated and real financial data.



Biography Olivier SCAILLET:

Olivier Scaillet, Belgo-Swiss, is Professor of Finance and Statistics at University of Geneva and a senior chair at the Swiss Finance Institute. He holds both a master and Ph.D. from University Paris IX Dauphine in applied mathematics. Professor Scaillet’s research expertise is in the area of derivatives pricing, econometric theory and econometrics applied to finance and insurance. He has published several papers in leading journals in econometrics and finance. He co-authored a book on financial econometrics. He has been one of the winners of the bi-annual award for the best paper published in the Journal of Empirical Finance on the topic of quantitative risk management and of the Banque Privée Espirito Santo award prize on the topic of mutual fund performance. Olivier is also Associate Editor of several academic journals in Econometrics, Statistics, and Finance. He has been an advisor of several banks and financial institutions.


This paper studies validation tools in backtesting systemic risk measures. They allow assessing systemic risk measure forecasts used to identify the financial institutions contributing the most to the whole risk of the financial system. They are similar to those assessing the market risk measures such as the value-at-risk or the expected shortfall. We introduce a concept of violation associated to the marginal expected shortfall (MES), and we define unconditional coverage and independence tests for these violations. We can generalize these tests to any MES-based systemic risk measures such as SES, SRISK, or ∆CoVaR. We study their asymptotic properties in presence of estimation risk and investigate their finite sample performances via Monte Carlo simulations. An empirical application is then carried out in order to check the validity of the MES, SRISK, and ∆CoVaR forecasts issued from a GARCH-DCC model for a panel of U.S. financial institutions. We conclude that this risk model is able to produce valid forecasts for the MES and SRISK when considering a medium term horizon. Finally, we show how to derive an early warning system for financial crisis from these backtesting tests, by defining an adjusted MES risk measure.

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