In this short note we propose a new backtesting framework for Expected Shortfall that could be used by the regulator. Instead of looking at the estimated capital reserve and the realized cash-flow separately, one could bind them into the secured position, for which the risk measurement process is much easier. Using this simple concept combined with monotonicity of Expected Shortfall with respect to its target confidence level, one can provide an unconditional coverage backtesting framework for Expected Shortfall that is a natural extension of the current Value-at-Risk regulatory traffic-light approach.
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