Estimation of the Marginal Expected Shortfall: the Mean When a Related Variable is Extreme

• DOI: 10.1111/rssb.12069
• Publication Date: 2014-05-15T20:35:09Z
• Authors: Juan-Juan Cai; John H. J. Einmahl; Laurens Haan; Chen Zhou
• Keywords: Quantile

Summary Denote the loss return on equity of a financial institution as X and that entire market Y. For given very small value p > 0, marginal expected shortfall (MES) is defined E{X|Y>QY(1−p)}, where Q Y(1 − p) (1 p)th quantile distribution The MES an important factor when measuring systemic risk institutions. wide non-parametric class bivariate distributions, we construct estimator establish asymptotic normality ↓ sample size n → ∞. Since are in particular interested case = O(1/n), use extreme techniques for deriving its behaviour. finite performance relevance limit theorem shown detailed simulation study. We also apply our method to estimate three large US investment banks.