Last January I looked at how the Swiss FX shock affected the most popular risk measures. Events of the past week give us another interesting test. My daily risk forecast shows the various risk measures for a number of assets, but focus on the SP-500, and the following picture taken from the site today:
Two of the risk measures, of course EVT and HS, do not budge. Then EWMA, GARCH and Student-T GARCH react each stronger than the other.
I do wonder why so many important decisions are made based on such unreliable risk forecasts. The most enthusiastic endorser, Basel Committee, had a great chance to do a rethink in Basel III, but instead opted to take steps backwards.
© All rights reserved, Jon Danielsson, 2021