CVaR sensitivity with respect to tail thickness

Stoyan V. Stoyanov, Svetlozar T. Rachev and Frank Fabozzi ()

No 29, Working Paper Series in Economics from Karlsruhe Institute of Technology (KIT), Department of Economics and Management

Abstract: We consider the sensitivity of conditional value-at-risk (CVaR) with respect to the tail index assuming regularly varying tails and exponential and faster-than-exponential tail decay for the return distribution. We compare it to the CVaR sensitivity with respect to the scale parameter for stable Paretian, the Student's t, and generalized Gaussian laws and discuss implications for the modeling of daily returns and marginal rebalancing decisions. Finally, we explore empirically the impact on the asymptotic variability of the CVaR estimator with daily returns which is a standard choice for the return frequency for risk estimation.

Keywords: fat-tailed distributions; regularly varying tails; conditional value-at-risk; marginal rebalancing; asymptotic variability (search for similar items in EconPapers)
Date: 2011
New Economics Papers: this item is included in nep-ban, nep-ecm and nep-rmg
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Citations: View citations in EconPapers (5)

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Journal Article: CVaR sensitivity with respect to tail thickness (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:kitwps:29

DOI: 10.5445/IR/1000023240

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