Since the 2008 Financial Crisis, stress tests based on extreme-yet-plausible scenarios have become a preferred method of assessing risk for large financial institutions, yet scenario choice has largely been ad-hoc. We propose a principled methodology to choose scenarios by minimizing the...

Modified Value-at-Risk (mVaR) and Modified Expected Shortfall (mES) are risk estimators that can be calculated without modelling the distribution of asset returns. These modified estimators use skewness and kurtosis corrections to normal distribution parametric VaR and ES formulas to reduce bias...