The Cornish-Fisher-Expansion in the context of Delta - Gamma - Normal approximations
AbstractQualitative and quantitative properties of the Cornish-Fisher-Expansion in the context of Delta-Gamma-Normal approaches to the computation of Value at Risk are presented. Some qualitative deficiencies of the Cornish-Fisher-Expansion - the monotonicity of the distribution function as well as convergence are not guaranteed - make it seem unattractive. In many practical situations, however, its actual accuracy is more than sufficient and the Cornish-Fisher-approximation can be computed faster (and simpler) than other methods like numerical Fourier inversion. This paper tries to provide a balanced view on when and when not to use Cornish-Fisher in this context. --
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Bibliographic InfoPaper provided by Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes in its series SFB 373 Discussion Papers with number 2001,54.
Date of creation: 2001
Date of revision:
Value at Risk; Delta-Gamma-Normal; Cornish-Fisher expansion; Edgeworth series; Gram-Charlier series;
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- C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
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