The quantum harmonic oscillator expected shortfall model

This paper presents a new Expected Shortfall (ES) model based on the Quantum Harmonic Oscillator (QHO). It is used to estimate market risk in banks and other financial institutions according to Basel III standard. Predictions of the model agree with the empirical data which displays deviations from...

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Bibliographic Details
Published inEstudios de Economía Vol. 50; no. 2; pp. 233 - 261
Main Authors Markovic, Vladimir M, Radivojevic, Nikola, Ivanovic, Tatjana, Radisic, Slobodan, Novakovic, Nenad
Format Journal Article
LanguageEnglish
Portuguese
Published Santiago de Chile Universidad de Chile, Departamento de Economía 01.12.2023
Estudios de Economia
Universidad de Chile. Departamento de Economía
Subjects
Artificial intelligence
Basel III standard
Basilea III
Déficit esperado
Economic policy
ECONOMICS
Equilibrium
Expected Shortfall
Financial institutions
Kurtosis
market risk
Normal distribution
Normality
Oscillators
Rates of return
retorno accionario
riesgo de mercado
Risk assessment
S&P
S&P index
Schrodinger equation
Securities markets
Skewness
Stock exchanges
stock returns
Expected Shortfall
Basel III standard
market risk
Basilea III
S&P index
riesgo de mercado
S&P
stock returns
Déficit esperado
retorno accionario
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Summary:This paper presents a new Expected Shortfall (ES) model based on the Quantum Harmonic Oscillator (QHO). It is used to estimate market risk in banks and other financial institutions according to Basel III standard. Predictions of the model agree with the empirical data which displays deviations from normality. Using backtesting, it is shown that the model can be reliably used to assess market risk.
ISSN:0718-5286
0304-2758
0718-5286
DOI:10.4067/S0718-52862023000200233