Diversification benefits under multivariate second order regular variation

Bikramjit Das () and Marie Kratz ()
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Bikramjit Das: Singapore University of Technology and Design, Postal: Singapore University of Technology and Design, 8 Somapah Road, Singapore 487372,
Marie Kratz: ESSEC Research Center, ESSEC Business School, Postal: ESSEC Research Center, BP 105, 95021 Cergy, France

No WP1706, ESSEC Working Papers from ESSEC Research Center, ESSEC Business School

Abstract: We analyze risk diversification in a portfolio of heavy-tailed risk factors under the assumption of second order multivariate regular variation. Asymptotic limits for a measure of diversification benefit are obtained when considering, for instance, the value-at-risk . The asymptotic limits are computed in a few examples exhibiting a variety of different assumptions made on marginal or joint distributions. This study ties up existing related results available in the literature under a broader umbrella.

Keywords: asymptotic theory; diversification benefit; heavy tail; risk concentration; second order regular variation; value-at-risk (search for similar items in EconPapers)
JEL-codes: C02 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2017-04
New Economics Papers: this item is included in nep-ban, nep-rmg and nep-sea
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