Calculation of expected shortfall for measuring risk and its applications

  • Yan Chun-ning 
  • Yu Peng 
  • Huang Yang-xin 
Management Science
Received:
Revised:

Abstract

Expected shortfall(ES) is a new method to measure market risk. In this paper, an example was presented to illustrate that the ES is coherent but value-at-risk(VaR) is not coherent. Three formulas for calculating the ES based on historical simulation method, normal method and GARCH method were derived. Further, a numerical experiment on optimizing portfolio using ES was provided.

Key words

coherent expected shortfall(ES) value-at-risk(VaR) 
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Copyright information

© Shanghai University 2005

Authors and Affiliations

  • Yan Chun-ning 
    • 1
  • Yu Peng 
    • 1
  • Huang Yang-xin 
    • 2
  1. 1.College of International Business and ManagementShanghai UniversityShanghaiP.R. China
  2. 2.Department of Biostatistics and Computational BiologyUniversity of RochesterNew YorkUSA

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