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Keywords:
| coherent |
|
|
| sub-additivity |
|
|
| tail |
|
|
| index |
|
|
Categories:
| VaR Methods |
|
|
| --Properties of VaR |
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|
Half-Life:
Impact:
Sub-Additivity Re-Examined: The Case for Value-at-Risk
Year Of Publication: 2005
Month Of Publication: February
Pages: 21
Download Count: 863
View Count:
Comment Num: 0
Language: EN
Source:
Who Can Read: Free
Date: 4-30-2005
Publisher: Administrator
Summary
This paper studies the issue of sub-additivity of Value-at-Risk (VaR) for heavy tailedasset returns. Using the notion of “regular variation” to define heavy tailed distribution,we establish that for heavy tailed asset return distributions with well defined mean, VaRis sub-additive in the tail region, the most relevant region for risk management. This isfurther demonstrated with the help of Monte Carlo simulation of 95% and 99% VaR forasset returns following three categories of bivariate distributions. Our results provide anew dimension into the ongoing debate over non sub-additivity of Va
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