Back-testing expected shortfall
The discovery that expected shortfall (ES) is not elicitable propagated the belief that it could not be back-tested and aroused a number of criticisms of the Basel Committee’s adoption of ES over value-at-risk. In this article, Carlo Acerbi and Balázs Székely propose three back-testing methodologies for ES that are more powerful than the Basel VAR test, and observe that elicitability is irrelevant when it comes to the choice of a regulatory risk standard
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Risk professionals had never heard of elicitability before 2011, when Gneiting (2011) proved that expected shortfall (ES) is not elicitable, unlike value-at-risk. This result sparked a confusing debate.
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