Tail Risk of Multivariate Regular Variation

Harry Joe () and Haijun Li ()
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Harry Joe: University of British Columbia
Haijun Li: Washington State University

Methodology and Computing in Applied Probability, 2011, vol. 13, issue 4, 671-693

Abstract: Abstract Tail risk refers to the risk associated with extreme values and is often affected by extremal dependence among multivariate extremes. Multivariate tail risk, as measured by a coherent risk measure of tail conditional expectation, is analyzed for multivariate regularly varying distributions. Asymptotic expressions for tail risk are established in terms of the intensity measure that characterizes multivariate regular variation. Tractable bounds for tail risk are derived in terms of the tail dependence function that describes extremal dependence. Various examples involving Archimedean copulas are presented to illustrate the results and quality of the bounds.

Keywords: Coherent risk; Tail conditional expectation; Regularly varying; Copula; Tail dependence; 62H20; 91B30 (search for similar items in EconPapers)
Date: 2011
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DOI: 10.1007/s11009-010-9183-x

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