New method accurately predicts financial crises, outperforming traditional models.
A new method for predicting financial losses during crises has been developed. It uses a two-step process to estimate the Value at Risk (VaR) at different levels, then calculates the Expected Shortfall (ES) as a weighted average of these estimates. The weighting system is optimized to minimize losses. The method was tested with simulations and real data from the 2008 financial crisis, showing better forecasting performance compared to other models.