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Asymptotic risk decomposition for regularly varying distributions with tail dependence

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  • Jaunė, Eglė
  • Šiaulys, Jonas

Abstract

In this paper we investigate the limiting behaviour of Conditional Tail Expectation (CTE) and its decomposition for a sum of real-valued tail-dependent random variables with regularly varying distributions. Asymptotic proportions to the corresponding Value at Risk (VaR) measures are obtained for a flexible dependence structure. For a certain practical case considering an investment portfolio exact formulas are derived and sensitivity to model parameters is analysed. We also carry out a simulation study verifying our results and revealing the speed of convergence for different values of parameters.

Suggested Citation

  • Jaunė, Eglė & Šiaulys, Jonas, 2022. "Asymptotic risk decomposition for regularly varying distributions with tail dependence," Applied Mathematics and Computation, Elsevier, vol. 427(C).
    • Handle: RePEc:eee:apmaco:v:427:y:2022:i:c:s0096300322002247
    DOI: 10.1016/j.amc.2022.127164
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    Cited by:

    1. Gustas Mikutavičius & Jonas Šiaulys, 2023. "Product Convolution of Generalized Subexponential Distributions," Mathematics, MDPI, vol. 11(1), pages 1-11, January.

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