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Scientific article
Open access
English

Sensitivity analysis of VaR and Expected Shortfall for portfolios under netting agreements

Published inJournal of banking & finance, vol. 29, no. 4, p. 927-958
Publication date2005
Abstract

In this paper, we characterize explicitly the first derivative of the Value at Risk and the Expected Shortfall with respect to portfolio allocations when netting between positions exists. As a particular case, we examine a simple Gaussian example in order to illustrate the impact of netting agreements in credit risk management. Collateral issues are also dealt with. For practical purposes we further provide nonparametric estimators for sensitivities and derive their asymptotic distributions. An empirical application on a typical banking portfolio is finally provided.

Keywords
  • Value at Risk
  • Expected Shortfall
  • Sensitivity
  • Risk management
  • Credit risk
  • Netting
  • Collateral
Citation (ISO format)
FERMANIAN, Jean-David, SCAILLET, Olivier. Sensitivity analysis of VaR and Expected Shortfall for portfolios under netting agreements. In: Journal of banking & finance, 2005, vol. 29, n° 4, p. 927–958. doi: 10.1016/j.jbankfin.2004.08.007
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Article (Accepted version)
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ISSN of the journal0378-4266
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