Topic: Risk Management under Noisy Observations

Lecturer: Xiaojun SONG, holding a doctoral degree in Economics from Universidad Carlos III de Madrid in Madrid, Spain, is Assistant Professor at the Department of Business Statistics and Econometrics, Guanghua School of Management, Peking University. His main research interests are Econometric Theory, Nonparametric and Semiparametric Methods, Specification Testing, Bootstrap Methods, Time Series Analysis.

Time: Dec. 10, 2018, Monday, 13:30-14:30

Venue: Room 913, Main Building in city campus of CUFE

Moderator: Hui WANG, Professor in the School of Finance at CUFE

Abstract: In this paper, we provide an estimation of the Value-at-Risk and Expected Shortfall that captures the effects of market microstructure noise on a latent portfolio return. It is well known that noise can cause serious problems in estimating risk. Using a deconvolution kernel estimator for the conditional probability distribution function of the unobserved portfolio return, we propose an analytical approximation for conditional Value-at-Risk (VaR) and a closed-form solution for conditional Expected Shortfall (ES). We investigate in both simulation experiments and an empirical application the performance of our proposed implementation.