Forecasting compositional risk allocations

Tim J. Boonen (), Montserrat Guillén and Miguel Santolino
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Tim J. Boonen: University of Amsterdam
Montserrat Guillén: Riskcenter, Department of Econometrics, University of Barcelona. Diagonal Av. 690, 08034, Barcelona, Spain.
Miguel Santolino: Riskcenter, Department of Econometrics, University of Barcelona. Diagonal Av. 690, 08034, Barcelona, Spain.

No XREAP2017-04, Working Papers from Xarxa de Referència en Economia Aplicada (XREAP)

Abstract: We analyse models for panel data that arise in risk allocation problems,when a given set of sources are the cause of an aggregate risk value. We focus on the modeling and forecasting of proportional contributions to risk. Compositional data methods are proposed and the regression is flexible to incorporate external information from other variables. We guarantee that projected proportional contributions add up to 100%, and we introduce a method to generate confidence regions with the same restriction. An illustration using data from the stock exchange is provided.

Keywords: Simplex; capital allocation; dynamic management. (search for similar items in EconPapers)
JEL-codes: C02 D81 G22 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2017-10, Revised 2017-10
New Economics Papers: this item is included in nep-ecm, nep-ore and nep-rmg
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http://www.xreap.cat/RePEc/xrp/pdf/XREAP2017-04.pdf Revised version, 2017 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:xrp:wpaper:xreap2017-04

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