medium · FRM Part 2 Market Risk
Why is bootstrapping Expected Shortfall (ES) generally expected to produce more stable results than bootstrapping VaR at the same confidence level?
- ES does not require the i.i.d. assumption needed for a valid bootstrap procedure.
- ES averages multiple tail points, which diversifies away the noise of a single order statistic
- ES is always numerically smaller than VaR, which produces a smaller standard error.
- ES is a non-elicitable risk measure, which paradoxically makes it easier to backtest in practice.
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