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Risk management under incomplete information: Exact upper and lower bounds for the probability to reach extreme values

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Author Info

  • DE SCHEPPER, Ann
  • HEIJNEN, Bart

Abstract

A key problem in financial and actuarial research, and particularly in the field of risk management, is the choice of models so as to avoid systematic biases in the measurement of risk. An alternative consists of working with incomplete information, by fixing only a number of parameters instead of a complete distribution, which results in bounds instead of unique results. In the present contribution, we present upper and lower bounds for tail probabilities or probabilities to reach extreme values, in case the information about the underlying distribution is restricted to successive moments, and possibly the mode. Part of these results were already published earlier, but we present them here in a uniform and clear way, and we add results for the case of three moments.

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File URL: https://www.uantwerpen.be/images/uantwerpen/container1244/files/TEW%20-%20Onderzoek/Working%20Papers/RPS/2006/RPS-2006-019.pdf
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Bibliographic Info

Paper provided by University of Antwerp, Faculty of Applied Economics in its series Working Papers with number 2006019.

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Length: 14 pages
Date of creation: Aug 2006
Date of revision:
Handle: RePEc:ant:wpaper:2006019

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Postal: Prinsstraat 13, B-2000 Antwerpen
Web page: https://www.uantwerp.be/en/faculties/applied-economic-sciences/
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Related research

Keywords: Risk management; Incomplete information; Tail probability; Extreme values;

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  1. DE SCHEPPER, Ann & HEIJNEN, Bart, 2006. "Risk management under incomplete information: Exact upper and lower bounds for the Value at Risk," Working Papers 2006020, University of Antwerp, Faculty of Applied Economics.
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Cited by:
  1. DE SCHEPPER, Ann & HEIJNEN, Bart, 2006. "Risk management under incomplete information: Exact upper and lower bounds for the Value at Risk," Working Papers 2006020, University of Antwerp, Faculty of Applied Economics.

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