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CVaR sensitivity with respect to tail thickness

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Author Info

  • Stoyanov, Stoyan V.
  • Rachev, Svetlozar T.
  • Fabozzi, Frank J.

Abstract

We consider the sensitivity of conditional value-at-risk (CVaR) with respect to the tail index assuming regularly varying tails and exponential and faster-than-exponential tail decay for the return distribution. We compare it to the CVaR sensitivity with respect to the scale parameter for stable Paretian, the Student's t, and generalized Gaussian laws and discuss implications for the modeling of daily returns and marginal rebalancing decisions. Finally, we explore empirically the impact on the asymptotic variability of the CVaR estimator with daily returns which is a standard choice for the return frequency for risk estimation. --

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Bibliographic Info

Paper provided by Karlsruhe Institute of Technology (KIT), Department of Economics and Business Engineering in its series Working Paper Series in Economics with number 29.

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Date of creation: 2011
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Handle: RePEc:zbw:kitwps:29

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Web page: http://www.wiwi.kit.edu/
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Related research

Keywords: fat-tailed distributions; regularly varying tails; conditional value-at-risk; marginal rebalancing; asymptotic variability;

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Cited by:
  1. Stoyanov, Stoyan V. & Rachev, Svetlozar T. & Racheva-Iotova, Boryana & Fabozzi, Frank J., 2011. "Fat-tailed models for risk estimation," Working Paper Series in Economics, Karlsruhe Institute of Technology (KIT), Department of Economics and Business Engineering 30, Karlsruhe Institute of Technology (KIT), Department of Economics and Business Engineering.

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