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A Tail Measure With Variable Risk Tolerance: Application in Dynamic Portfolio Insurance Strategy

Author

Listed:
  • Wentao Hu

    (Shandong University)

  • Cuixia Chen

    (Hebei Finance University)

  • Yufeng Shi

    (Shandong University)

  • Ze Chen

    (Renmin University of China
    Renmin University of China)

Abstract

Risk measures for tail risk have an important application in the dynamic portfolio insurance strategies. We propose a new risk measure called SlideVaR which overcome the limitation of traditional measures like VaR and ES, and can sufficiently reflect the market changes. Several important properties of SlideVaR and its generalized risk measure have been investigated. Then, we further apply SlideVaR into constructing dynamic portfolio insurance strategy. Our numerical analysis shows that SlideVaR-based portfolio insurance strategy has advantage especially in markets where the state changes frequently.

Suggested Citation

  • Wentao Hu & Cuixia Chen & Yufeng Shi & Ze Chen, 2022. "A Tail Measure With Variable Risk Tolerance: Application in Dynamic Portfolio Insurance Strategy," Methodology and Computing in Applied Probability, Springer, vol. 24(2), pages 831-874, June.
    • Handle: RePEc:spr:metcap:v:24:y:2022:i:2:d:10.1007_s11009-022-09951-4
    DOI: 10.1007/s11009-022-09951-4
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