Learning extreme Expected Shortfall and Conditional Tail Moments with neural networks. Application to cryptocurrency data

Michaël Allouche (1) , Stéphane Girard (2) , Emmanuel Gobet (3)

1 Kaiko [Paris]
2 STATIFY - Modèles statistiques bayésiens et des valeurs extrêmes pour données structurées et de grande dimension
3 CMAP - Centre de Mathématiques Appliquées de l'Ecole polytechnique

We propose a neural networks method to estimate extreme Expected Shortfall, and even more generally, extreme conditional tail moments as functions of confidence levels, in heavy-tailed settings. The convergence rate of the uniform error between the log-conditional tail moment and its neural network approximation is established leveraging extreme-value theory (in particular the high-order condition on the distribution tails) and using critically two activation functions (eLU and ReLU) for neural networks. The finite sample performance of the neural network estimator is compared to bias-reduced extreme-value competitors using synthetic heavy-tailed data. The experiments reveal that our method largely outperforms others. In addition, the selection of the anchor point appears to be much easier and stabler than for other methods. Finally, the neural network estimator is tested on real data related to extreme loss returns in cryptocurrencies: here again, the accuracy obtained by cross-validation is excellent, and is much better compared with competitors.

Mots clés: Risk measures; Extreme-value theory; heavy-tailed distribution; neural networks

Domaines: Statistiques [math.ST]

Michaël Allouche, Stéphane Girard, Emmanuel Gobet. Learning extreme Expected Shortfall and Conditional Tail Moments with neural networks. Application to cryptocurrency data. 2023. ⟨hal-04347859v5⟩