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Efficient VaR and Expected Shortfall Computations for Nonlinear Portfolios within the Delta-Gamma Approach
Company: Applied Mathematics and Computation
Company Url: Click here to open
Year Of Publication: 2014
Month Of Publication: October
Resource Link: Click here to open
Pages: 16-31
Download Count: 0
View Count: 1809
Comment Num: 0
Language: English
Source: article
Who Can Read: Free
Date: 7-19-2014
Publisher: Administrator
Summary
We present four numerical methods to compute the Value-at-Risk and Expected Shortfall risk measure values of portfolios with financial options. The numerical methods are based on either wavelets or Fourier cosine approximations and belong to the class of Fourier inversion methods. We show that the risk measures can be efficiently calculated in terms of accuracy and CPU time. Besides, we provide a theoretical result about the shape of the resulting probability density. This a priori knowledge, allows us to enhance the efficiency and effectiveness of the proposed methods. Finally, we assess the accuracy of the approach in the presence of convexity or concavity properties of the financial portfolios.
(volume 244)
This document may be available without charge from SSRN.com at this url:
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2317429
Author(s)
Oosterlee, Cornelis W. Sign in to follow this author
Ortiz-Gracia, Luis Sign in to follow this author
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