Advanced Expected Tail Loss Measurement and Quantification for the Moroccan All Shares Index Portfolio

Marouane Airouss,Abdelhak Hassouni,Amale Lahlou,Mohamed Tahiri

doi:10.3390/math6030038

Abstract

In this paper, we have analyzed and tested the Expected Tail Loss (ETL) approach for the Value at Risk (VaR) on the Moroccan stock market portfolio. We have compared the results with the general approaches for the standard VaR, which has been the most suitable method for Moroccan stock investors up to now. These methods calculate the maximum loss that a portfolio is likely to experience over a given time span. Our work advances those modeling methods with supplementation by inputs from the ETL approach for application to the Moroccan stock market portfolio—the Moroccan All Shares Index (MASI). We calculate these indicators using several methods, according to an easy and fast implementation with a high-level probability and with accommodation for extreme risks; this is in order to numerically simulate and study their behavior to better understand investment opportunities and, thus, form a clear view of the Moroccan financial landscape.

Highlights

Extended financial risk management is the immediate solution to which researchers, economists, and financial managers have turned since the last crisis
The procedure is as follows: First, we calculate the daily value of the securities that make up our portfolio in Dirhams (MAD) or as a percentage change from 01/01/2015 to 30/06/2017; we determine the performance of our portfolio on each date by the sum of the products of the weightings of securities multiplied by the returns: n
Value at Risk (VaR) is an essential indicator in risk management today

Summary

Introduction

Extended financial risk management is the immediate solution to which researchers, economists, and financial managers have turned since the last crisis. During extreme events, they aim to better understand the financial market by minimizing the potential losses of portfolio assets. In order to improve current risk indicators, they have focused their work on studying the distribution tail of these losses. The quantification of risk for good management was introduced by H. With its assumption that the risk of a portfolio can be properly mitigated by volatility measured by the variance of its profitability, this model has often been the target of severe criticism

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Discussion

Conclusion