# Robustness and sensitivity analysis of risk measurement procedures

Abstract : Measuring the risk of a financial portfolio involves two steps: estimating the loss distribution of the portfolio from available observations and computing a risk measure" which summarizes the risk of the portfolio. We define the notion of risk measurement procedure", which includes both of these steps and introduce a rigorous framework for studying the robustness of risk measurement procedures and their sensitivity to changes in the data set. Our results point to a conflict between subadditivity and robustness of risk measurement procedures and show that the same risk measure may exhibit quite different sensitivities depending on the estimation procedure used. Our results illustrate in particular that using recently proposed risk measures like CVaR/ expected shortfall lead to a less robust risk measurement procedure than historical Value at Risk. We also propose alternative risk measurement procedures which possess the robustness property.
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Article dans une revue
Quantitative Finance, Taylor & Francis (Routledge), 2010, 10 (6), pp.593 - 606. <10.1080/14697681003685597>
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https://hal.archives-ouvertes.fr/hal-00413729
Contributeur : Rama Cont <>
Soumis le : dimanche 6 septembre 2009 - 23:01:17
Dernière modification le : mercredi 12 octobre 2016 - 01:01:48
Document(s) archivé(s) le : mardi 15 juin 2010 - 23:16:01

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### Citation

Rama Cont, Romain Deguest, Giacomo Scandolo. Robustness and sensitivity analysis of risk measurement procedures. Quantitative Finance, Taylor & Francis (Routledge), 2010, 10 (6), pp.593 - 606. <10.1080/14697681003685597>. <hal-00413729>

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