BoE paper tackles multidimensional tail risk forecasting
Researchers set out method that can capture the multiple sources of risk feeding into a tail event
Research published by the Bank of England today (June 9) seeks to capture “multidimensional tail risks” to better understand how different sources of risk interact.
Arnold Polanski of the University of East Anglia and Evarist Stoja of the University of Bristol develop a method based on multidimensional value-at-risk (MVAR). They note that while standard value-at-risk models are probably fine for a portfolio, applications such as stress-testing demand a more nuanced understanding.
“While it is
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