Conditional Expectation as Quantile Derivative
For a linear combination of random variables, fix some confidence level and consider the quantile of the combination at this level. We are interested in the partial derivatives of the quantile with respect to the weights of the random variables in the combination. It turns out that under suitable conditions on the joint distribution of the random variables the derivatives exist and coincide with the conditional expectations of the variables given that their combination just equals the quantile. Moreover, using this result, we deduce formulas for the derivatives with respect to the weights of the variables for the so-called expected shortfall (first or higher moments) of the combination. Finally, we study in some more detail the coherence properties of the expected shortfall in case it is defined as a first conditional moment. Key words: quantile; value-at-risk; quantile derivative; conditional expectation; expected shortfall; conditional value-at-risk; coherent risk measure.
When requesting a correction, please mention this item's handle: RePEc:arx:papers:math/0104190. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (arXiv administrators)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.