@inbook{ec3e9879952f49368fa8ddfb9dd53921,
title = "Expected shortfall under a model with market and credit risks",
abstract = "Value-at-Risk (VaR), due to its simplicity and ease of interpretability, has become a popular risk measure in finance nowadays. However, recent research find that VaR is not a coherent risk measure and cannot incorporate the loss beyond VaR or tail risk. This chapter considers expected shortfall (ES) as an alternative risk measure. We consider a portfolio subject to both market and credit risks. We model the credit rating using a Markov chain. Thus our model can be treated as a Markovian regime-switching model. We also propose a weak Markov chain model which can take into account the dependency of the risks. Expressions for VaR, ES and numerical results are presented to illustrate the proposed ideas.",
keywords = "Coherent risk measure, Credit ranking, Credit risk, Expected shortfall, Market risk, Markov chain, Value at Risk, Weak Markov chain",
author = "Siu, {Kin Bong} and Hailiang Yang",
note = "Publisher Copyright: {\textcopyright} 2007, Springer New York LLC. All rights reserved.",
year = "2007",
language = "English",
series = "International Series in Operations Research and Management Science",
publisher = "Springer New York LLC",
pages = "91--100",
booktitle = "International Series in Operations Research and Management Science",
}