The quantum harmonic oscillator expected shortfall model

Vladimir M. Markovic; Nikola Radivojevic; Tatjana Ivanovic; Slobodan Radisic; Nenad Novakovic

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The quantum harmonic oscillator expected shortfall model

Authors

Vladimir M. Markovic University of Kragujevac https://orcid.org/0000-0003-3075-7226
Nikola Radivojevic Academy at applied studies Sumadia in Kragujevac https://orcid.org/0000-0002-6137-4431
Tatjana Ivanovic University of Pristina https://orcid.org/0000-0001-7172-8160
Slobodan Radisic University of Novi Sad https://orcid.org/0000-0001-8089-5518
Nenad Novakovic University of Novi Sad https://orcid.org/0000-0002-2692-3386

Vol. 50 No. 2 (2023): December

Abstract

This paper presents a new Expected Shortfall (ES) model based on the Quantum Harmonic Oscillator (QHO). It is used to estimate market risk in banks and other financial institutions according to Basel III standard. Predictions of the model agree with the empirical data which displays deviations from normality. Using backtesting, it is shown that the model can be reliably used to assess market risk.

Keywords:

Expected Shortfall, market risk, Basel III standard, stock returns, S&P index

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How to Cite

Markovic, V. M., Radivojevic, N., Ivanovic, T., Radisic, S., & Novakovic, N. (2024). The quantum harmonic oscillator expected shortfall model. Estudios De Economía, 50(2), pp. 233–261. Retrieved from https://estudiosdeeconomia.uchile.cl/index.php/EDE/article/view/73205 (Original work published December 18, 2023)