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Risk Capital Allocation Based on Minimal Excess Principle Constrained by Expected Shortfall in Chinese Market

In: Liss 2014

Author

Listed:
  • Chengli Zheng

    (Huazhong Normal University
    Stony Brook University)

  • Feng Gao

    (Huazhong Normal University
    Stony Brook University)

Abstract

The risk capital allocation problem comes from the diversification of one portfolio. In this paper, we combine the minimal excess principle and expected shortfall into capital allocation with Chinese market portfolio data. And the loss distributions are estimated through extreme value theory which is suitable for the property of fat tail. Our idea satisfies the requirements of coherent risk measure and capital allocation rules. Comparing with two other allocation rules, the result turns out that our allocation can be more efficient, more precise and fairer.

Suggested Citation

  • Chengli Zheng & Feng Gao, 2015. "Risk Capital Allocation Based on Minimal Excess Principle Constrained by Expected Shortfall in Chinese Market," Springer Books, in: Zhenji Zhang & Zuojun Max Shen & Juliang Zhang & Runtong Zhang (ed.), Liss 2014, edition 127, pages 903-910, Springer.
    • Handle: RePEc:spr:sprchp:978-3-662-43871-8_130
    DOI: 10.1007/978-3-662-43871-8_130
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