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Estimation and decomposition of downside risk for portfolios with non-normal returns

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Author Info
Boudt, Kris
Peterson, Brian
Croux, Christophe

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Abstract

We propose a new estimator for Expected Shortfall that uses asymptotic expansions to account for the asymmetry and heavy tails in financial returns. We provide all the necessary formulas for decomposing estimators of Value at Risk and Expected Shortfall based on asymptotic expansions and show that this new methodology is very useful for analyzing and predicting the risk properties of portfolios of alternative investments.

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File URL: http://mpra.ub.uni-muenchen.de/5427/
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Publisher Info
Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 5427.

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Date of creation: 17 Aug 2007
Date of revision: 23 Oct 2007
Handle: RePEc:pra:mprapa:5427

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Related research
Keywords: Alternative investments Component Value at Risk Cornish-Fisher expansion downside risk expected shortfall portfolio risk contribution Value at Risk.

Find related papers by JEL classification:
C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Estimation
C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models
G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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References listed on IDEAS
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  1. Christian Gourieroux & J. P. Laurent & Olivier Scaillet, 2000. "Sensitivity Analysis of Values at Risk," Econometric Society World Congress 2000 Contributed Papers 0162, Econometric Society. [Downloadable!]
    Other versions:
  2. Khan, Jafar A. & Van Aelst, Stefan & Zamar, Ruben H., 2007. "Robust Linear Model Selection Based on Least Angle Regression," Journal of the American Statistical Association, American Statistical Association, vol. 102, pages 1289-1299, December. [Downloadable!] (restricted)
  3. Baillie, Richard T. & Bollerslev, Tim, 1992. "Prediction in dynamic models with time-dependent conditional variances," Journal of Econometrics, Elsevier, vol. 52(1-2), pages 91-113. [Downloadable!] (restricted)
    Other versions:
  4. Keith Kuester & Stefan Mittnik & Marc S. Paolella, 2006. "Value-at-Risk Prediction: A Comparison of Alternative Strategies," Journal of Financial Econometrics, Oxford University Press, vol. 4(1), pages 53-89. [Downloadable!] (restricted)
  5. Acerbi, Carlo & Tasche, Dirk, 2002. "On the coherence of expected shortfall," Journal of Banking & Finance, Elsevier, vol. 26(7), pages 1487-1503, July. [Downloadable!] (restricted)
  6. Winfried G. Hallerbach, 1999. "Decomposing Portfolio Value-at-Risk: A General Analysis," Tinbergen Institute Discussion Papers 99-034/2, Tinbergen Institute. [Downloadable!]
  7. Giot, P. & Laurent, S., 2001. "Value-at-risk for Long and Short Trading Positions," Papers 0122, Universite catholique de Louvain - Center for Operations Research and Economics (CORE).
    Other versions:
  8. Fernandez, C. & Steel, M.F.J., 1996. "On Bayesian modelling of fat tails and skewness," Discussion Paper 58, Tilburg University, Center for Economic Research. [Downloadable!]
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This page was last updated on 2008-11-17.

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