Parametric measures of variability induced by risk measures

• Published in: Insurance, mathematics & economics Vol. 106; pp. 270 - 284
• Main Authors: Bellini, Fabio, Fadina, Tolulope, Wang, Ruodu, Wei, Yunran
• Format: Journal Article
• Language: English
• Published: Elsevier B.V 01.09.2022
• Subjects: Expected shortfall; Expectiles; Risk management; Stochastic orders; Variability measures; Stochastic orders; D81; Risk management; Variability measures; Expectiles; Expected shortfall
• ISSN: 0167-6687; 1873-5959
• DOI: 10.1016/j.insmatheco.2022.07.009

We present a general framework for a comparative theory of variability measures, with a particular focus on the recently introduced one-parameter families of inter-Expected Shortfall differences and inter-expectile differences, that are explored in detail and compared with the widely known and applied inter-quantile differences. From the mathematical point of view, our main result is a characterization of symmetric and comonotonic variability measures as mixtures of inter-Expected Shortfall differences, under a few additional technical conditions. Further, we study the stochastic orders induced by the pointwise comparison of inter-Expected Shortfall and inter-expectile differences, and discuss their relationship with the dilation order. From the statistical point of view, we establish asymptotic consistency and normality of the natural estimators and provide a rule of the thumb for cross-comparisons. Finally, we study the empirical behavior of the considered classes of variability measures on the S&P 500 Index under various economic regimes, and explore the comparability of different time series according to the introduced stochastic orders.