NONPARAMETRIC ESTIMATION OF CONDITIONAL VALUE-AT-RISK AND EXPECTED SHORTFALL BASED ON EXTREME VALUE THEORY

摘要

We propose nonparametric estimators for conditional value-at-risk (CVaR) and conditional expected shortfall (CES) associated with conditional distributions of a series of returns on a financial asset. The return series and the conditioning covariates, which may include lagged returns and other exogenous variables, are assumed to be strong mixing and follow a nonparametric conditional location-scale model. First stage nonparametric estimators for location and scale are combined with a generalized Pareto approximation for distribution tails proposed by Pickands (1975, Annals of Statistics 3, 119-131) to give final estimators for CVaR and CES. We provide consistency and asymptotic normality of the proposed estimators under suitable normalization. We also present the results of a Monte Carlo study that sheds light on their finite sample performance. Empirical viability of the model and estimators is investigated through a backtesting exercise using returns on future contracts for five agricultural commodities.