Describing the Distribution of Returns and Calculating Expected Shortfall Based on Mixture Density Networks
Ziyuan Sun · Application of Statistics and Management · 2007
This paper applies mixture density networks(MDNs) to forecast the time-varying conditional density value of financial time series,and puts forth a new numerical algorithm to calculate Expected Shortfall.The application in Hong Kong Hangseng index approves that MDNs effectively describe the empirical distribution of returns and the volatility mechanism and have good forecasting ability.As a new model for financial market risk measure,MDNs can precisely calculate both Value-at-Risk at high probability levels and Expected Shortfall.