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Higher order elicitability and Osband's principle

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  • Tobias Fissler
  • Johanna F. Ziegel

Abstract

A statistical functional, such as the mean or the median, is called elicitable if there is a scoring function or loss function such that the correct forecast of the functional is the unique minimizer of the expected score. Such scoring functions are called strictly consistent for the functional. The elicitability of a functional opens the possibility to compare competing forecasts and to rank them in terms of their realized scores. In this paper, we explore the notion of elicitability for multi-dimensional functionals and give both necessary and sufficient conditions for strictly consistent scoring functions. We cover the case of functionals with elicitable components, but we also show that one-dimensional functionals that are not elicitable can be a component of a higher order elicitable functional. In the case of the variance this is a known result. However, an important result of this paper is that spectral risk measures with a spectral measure with finite support are jointly elicitable if one adds the `correct' quantiles. A direct consequence of applied interest is that the pair (Value at Risk, Expected Shortfall) is jointly elicitable under mild conditions that are usually fulfilled in risk management applications.

Suggested Citation

  • Tobias Fissler & Johanna F. Ziegel, 2015. "Higher order elicitability and Osband's principle," Papers 1503.08123, arXiv.org, revised Sep 2015.
  • Handle: RePEc:arx:papers:1503.08123
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    References listed on IDEAS

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    Cited by:

    1. Véronique Maume-Deschamps & Didier Rullière & Khalil Said, 2017. "Multivariate Extensions Of Expectiles Risk Measures," Working Papers hal-01367277, HAL.
    2. Giampiero Gallo & Ostap Okhrin & Giuseppe Storti, 2024. "Dynamic tail risk forecasting: what do realized skewness and kurtosis add?," Papers 2409.13516, arXiv.org.
    3. Rafael Frongillo & Ian A. Kash, 2015. "Elicitation Complexity of Statistical Properties," Papers 1506.07212, arXiv.org, revised Aug 2020.
    4. Gordy, Michael B. & McNeil, Alexander J., 2020. "Spectral backtests of forecast distributions with application to risk management," Journal of Banking & Finance, Elsevier, vol. 116(C).
    5. Werner Ehm & Tilmann Gneiting & Alexander Jordan & Fabian Krüger, 2016. "Of quantiles and expectiles: consistent scoring functions, Choquet representations and forecast rankings," Journal of the Royal Statistical Society Series B, Royal Statistical Society, vol. 78(3), pages 505-562, June.
    6. Yannick Armenti & Stéphane Crépey & Samuel Drapeau & Antonis Papapantoleon, 2018. "Multivariate Shortfall Risk Allocation and Systemic Risk," Working Papers hal-01764398, HAL.
    7. Matteo Burzoni & Ilaria Peri & Chiara Maria Ruffo, 2016. "On the properties of the Lambda value at risk: robustness, elicitability and consistency," Papers 1603.09491, arXiv.org, revised Feb 2017.
    8. Hong Shaopeng, 2020. "Generalized Autoregressive Score asymmetric Laplace Distribution and Extreme Downward Risk Prediction," Papers 2008.01277, arXiv.org, revised Oct 2020.
    9. Alex Golodnikov & Viktor Kuzmenko & Stan Uryasev, 2019. "CVaR Regression Based on the Relation between CVaR and Mixed-Quantile Quadrangles," JRFM, MDPI, vol. 12(3), pages 1-22, June.

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