Under the Basel II regulatory framework non-negligible statistical problems arise when backtesting risk measures. In …. According to Escanciano and Olmo (2010, 2011) these problems persist when incorporating estimation and model risk by adjusting … adequacy of Value at Risk measures. One main finding indicates that backtests of all classes show heavy size distortions. These …

The paper proposes a new approach to model risk measurement based on the Wasserstein distance between two probability … measures. It formulates the theoretical motivation resulting from the interpretation of fictitious adversary of robust risk … nominal model. The Wasserstein approach suits for all types of model risk problems, ranging from the single-asset hedging risk …

Financial risk measurement relies on models of prices and other market variables, but models inevitably rely on … finds the worst-case error in risk measurement that would be incurred through a deviation from the baseline model, given a … in a model. We apply this approach to problems of portfolio risk measurement, credit risk, delta hedging, and …

Research related to aggregation, robustness, and model uncertainty of regulatory risk measures, for instance, Value-at-Risk … a risk measure to the uncertainty of dependence in risk aggregation. It turns out that coherent risk measures, such as … uncertainty spread compared to ES. The results warn that unjustified diversification arguments for VaR used in risk management …