McNeil, Alexander John orcid.org/0000-0002-6137-2890 and Balter, Janine Christine (2018) On the Basel Liquidity Formula for Elliptical Distributions. Risks. pp. 1-14. ISSN 2227-9091
Abstract
A justification of the Basel liquidity formula for risk capital in the trading book is given under the assumption that market risk-factor changes form a Gaussian white noise process over 10-day time steps and changes to P&L (profit-and-loss) are linear in the risk-factor changes. A generalization of the formula is derived under the more general assumption that risk-factor changes are multivariate elliptical. It is shown that the Basel formula tends to be conservative when the elliptical distributions are from the heavier-tailed generalized hyperbolic family. As a by-product of the analysis, a Fourier approach to calculating expected shortfall for general symmetric loss distributions is developed.
Metadata
Item Type: | Article |
---|---|
Authors/Creators: |
|
Copyright, Publisher and Additional Information: | © 2018, The Author(s). |
Keywords: | Basel Accords; liquidity risk; risk measures; expected shortfall; elliptical distributions; generalized hyperbolic distributions |
Dates: |
|
Institution: | The University of York |
Academic Units: | The University of York > Faculty of Social Sciences (York) > The York Management School |
Depositing User: | Pure (York) |
Date Deposited: | 06 Sep 2018 10:50 |
Last Modified: | 16 Oct 2024 15:03 |
Published Version: | https://doi.org/10.3390/risks6030092 |
Status: | Published |
Refereed: | Yes |
Identification Number: | 10.3390/risks6030092 |
Open Archives Initiative ID (OAI ID): | oai:eprints.whiterose.ac.uk:135384 |