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| Format: | Preprint |
| Published: |
2026
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| Online Access: | https://arxiv.org/abs/2603.22569 |
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| _version_ | 1866915885751468032 |
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| author | Zhong, Tenghan |
| author_facet | Zhong, Tenghan |
| contents | We introduce a proxy-reliance-controlled conformal recalibration framework for one-sided Value-at-Risk (VaR), and study a question that existing state-aware methods do not usually isolate: how strongly should the recalibration adjustment depend on an imperfect volatility proxy? We formalize this through a proxy-reliance parameter that continuously interpolates between an approximately constant-shift correction and a fully proxy-scaled correction. This makes proxy reliance a distinct and practically interpretable design choice in one-sided VaR recalibration.
We show theoretically that larger proxy reliance increases the responsiveness of the tail adjustment to proxy scale, but also increases stressed-state fragility when the proxy underreacts. Empirically, in rolling out-of-sample tests on a six-ETF panel with VIX-linked state variables, and with supporting evidence from SPY, we find that the empirical value of proxy-reliance control lies in improved stressed-state robustness rather than uniform overall dominance. In particular, when the baseline forecast remains exposed to proxy imperfection in stressed states, lower or intermediate proxy reliance can outperform fully proxy-scaled recalibration in stressed left-tail VaR control. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2603_22569 |
| institution | arXiv |
| publishDate | 2026 |
| record_format | arxiv |
| spellingShingle | Proxy-Reliance Control in Conformal Recalibration of One-Sided Value-at-Risk Zhong, Tenghan Risk Management Methodology We introduce a proxy-reliance-controlled conformal recalibration framework for one-sided Value-at-Risk (VaR), and study a question that existing state-aware methods do not usually isolate: how strongly should the recalibration adjustment depend on an imperfect volatility proxy? We formalize this through a proxy-reliance parameter that continuously interpolates between an approximately constant-shift correction and a fully proxy-scaled correction. This makes proxy reliance a distinct and practically interpretable design choice in one-sided VaR recalibration. We show theoretically that larger proxy reliance increases the responsiveness of the tail adjustment to proxy scale, but also increases stressed-state fragility when the proxy underreacts. Empirically, in rolling out-of-sample tests on a six-ETF panel with VIX-linked state variables, and with supporting evidence from SPY, we find that the empirical value of proxy-reliance control lies in improved stressed-state robustness rather than uniform overall dominance. In particular, when the baseline forecast remains exposed to proxy imperfection in stressed states, lower or intermediate proxy reliance can outperform fully proxy-scaled recalibration in stressed left-tail VaR control. |
| title | Proxy-Reliance Control in Conformal Recalibration of One-Sided Value-at-Risk |
| topic | Risk Management Methodology |
| url | https://arxiv.org/abs/2603.22569 |