Abstract
In 2011, the discovery that the Expected Shortfall (ES) is not elicitable, diffused the erroneous belief that it could not be backtested. This misconception aroused a number of criticisms to the recent decision of the Basel Committee to adopt ES in spite of VaR.
In this presentation, Dr. Carlo Acerbi will share three nonparametric backtest methodologies for ES which are shown to be more powerful than the Basel VaR test. These tests generally require the storage of more information but introduce no conceptual limitations nor computational difficulties of any sort. One of the proposed tests doesn’t even require the storage of additional data. Dr. Acerbi will explain that elicitability has in fact to do with model selection and not with model testing, and is therefore irrelevant for the choice of a regulatory risk standard. Further, Dr. Acerbi will discuss that ES can in practice, be jointly elicited with VaR. While this may turn out to be a useful result for model selection purposes, it will not impact the regulatory debate in any respect.
[PDF] Slides of the presentation