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A shortcut to sign Incremental Value-at-Risk for risk allocation

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  • Dirk Tasche
  • Luisa Tibiletti

Abstract

Approximate Incremental Value-at-Risk formulae provide an easy-to-use preliminary guideline for risk allocation. Both the cases of risk adding and risk pooling are examined and beta-based formulae achieved. Results highlight how much the conditions for adding new risky positions are stronger than those required for risk pooling. Key words: Incremental Value-at-Risk (IVaR); Risk pooling; Risk adding.

Suggested Citation

  • Dirk Tasche & Luisa Tibiletti, 2002. "A shortcut to sign Incremental Value-at-Risk for risk allocation," Papers cond-mat/0204593, arXiv.org, revised Oct 2002.
    • Handle: RePEc:arx:papers:cond-mat/0204593
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    References listed on IDEAS

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    1. Ross, Stephen A., 1999. "Adding Risks: Samuelson's Fallacy of Large Numbers Revisited," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 34(3), pages 323-339, September.
    2. Dowd, Kevin, 2000. "Adjusting for risk:: An improved Sharpe ratio," International Review of Economics & Finance, Elsevier, vol. 9(3), pages 209-222, July.
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