Statistical Methods in Finance 2023

December 19 to 23, 2023



Marginal Expected Shortfall

By TV Ramanathan
Savitribai Phule Pune University, India

A systemic risk is a risk due to the disruption of the financial services caused by an impairment of all or parts of the financial system and it has the potential to have a serious negative consequence on the real economy. One of the popular systemic risk measures SRISK considers it as a function of the institution’s size, leverage, and risk. Thus, the risk of the institution is a key component of SRISK and it is generally measured by the marginal expected shortfall. The marginal expected shortfall is defined as the expected return of an institution under the condition that the entire market return is less or equal to a given threshold. In this talk, we discuss some of the statistical developments related to the marginal expected shortfall.