Estimating portfolio risk for tail risk protection strategies

David Happersberger, Harald Lohre and Ingmar Nolte

European Financial Management, 2020, vol. 26, issue 4, 1107-1146

Abstract: We forecast portfolio risk for managing dynamic tail risk protection strategies, based on extreme value theory, expectile regression, copula‐GARCH and dynamic generalized autoregressive score models. Utilizing a loss function that overcomes the lack of elicitability for expected shortfall, we propose a novel expected shortfall (and value‐at‐risk) forecast combination approach, which dominates simple and sophisticated standalone models as well as a simple average combination approach in modeling the tail of the portfolio return distribution. While the associated dynamic risk targeting or portfolio insurance strategies provide effective downside protection, the latter strategies suffer less from inferior risk forecasts, given the defensive portfolio insurance mechanics.

Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

Downloads: (external link)
https://doi.org/10.1111/eufm.12256

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:eufman:v:26:y:2020:i:4:p:1107-1146

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=1354-7798

Access Statistics for this article

European Financial Management is currently edited by John Doukas

More articles in European Financial Management from European Financial Management Association Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().