Hi all
I hope my questions fits in this topic area.
I would like to know if someone has experience with ES as a daily Risk Measurement Tool for financial Institutions? Within my Bank there are thoughts to change VaR against ES as the new daily risk measurement (respectively as the tool with the relevant trader limit / trading book limit). VaR would only be another "Information-Tool" (like stress testing) to grab the whole picture regarding the loss distribution. Another point is to get "in line" with the upcoming regulatory standards --> "Fundatemental Review of the trading book".
My thoughts / issues which I see at this point for ES as a daily Risk Measurement Tool (at least within my bank):
- You have to communicate all the way up and down the new method and concepts without knowing if there is enough backup from the management for this idea
- Backtesting for ES is obviously more complicated than for VaR
- Obviously there is much more experience for VaR calcultation within a manual workaround as for ES. I think the calculations for ES (i.e. for a Position which is faulty in the risk system) needs more data and time
So, any thoughts about this topic?
Thank you very much in advance.
Regards, Alexander
I hope my questions fits in this topic area.
I would like to know if someone has experience with ES as a daily Risk Measurement Tool for financial Institutions? Within my Bank there are thoughts to change VaR against ES as the new daily risk measurement (respectively as the tool with the relevant trader limit / trading book limit). VaR would only be another "Information-Tool" (like stress testing) to grab the whole picture regarding the loss distribution. Another point is to get "in line" with the upcoming regulatory standards --> "Fundatemental Review of the trading book".
My thoughts / issues which I see at this point for ES as a daily Risk Measurement Tool (at least within my bank):
- You have to communicate all the way up and down the new method and concepts without knowing if there is enough backup from the management for this idea
- Backtesting for ES is obviously more complicated than for VaR
- Obviously there is much more experience for VaR calcultation within a manual workaround as for ES. I think the calculations for ES (i.e. for a Position which is faulty in the risk system) needs more data and time
So, any thoughts about this topic?
Thank you very much in advance.
Regards, Alexander
