Contour map of estimation error for Expected Shortfall
Imre Kondor, Fabio Caccioli, G\'abor Papp, Matteo Marsili
TL;DR
This paper constructs a contour map illustrating the estimation error of Expected Shortfall, enabling quantitative determination of required sample size for portfolio optimization based on size, confidence level, and error.
Contribution
It introduces a contour map of ES estimation error, providing a practical tool for assessing sample size needs in large-scale portfolio optimization.
Findings
Contour map of ES estimation error created
Sample size requirements can be quantitatively determined
Supports optimization of large portfolios with specified confidence and error levels
Abstract
The contour map of estimation error of Expected Shortfall (ES) is constructed. It allows one to quantitatively determine the sample size (the length of the time series) required by the optimization under ES of large institutional portfolios for a given size of the portfolio, at a given confidence level and a given estimation error.
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