Estimation and decomposition of downside risk for portfolios with non-normal returns

Kris Boudt, Brian Peterson and Christophe Croux

MPRA Paper from University Library of Munich, Germany

Abstract: We propose a new estimator for Expected Shortfall that uses asymptotic expansions to account for the asymmetry and heavy tails in financial returns. We provide all the necessary formulas for decomposing estimators of Value at Risk and Expected Shortfall based on asymptotic expansions and show that this new methodology is very useful for analyzing and predicting the risk properties of portfolios of alternative investments.

Keywords: Alternative investments; Component Value at Risk; Cornish-Fisher expansion; downside risk; expected shortfall; portfolio; risk contribution; Value at Risk. (search for similar items in EconPapers)
JEL-codes: C13 C22 G11 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ecm and nep-rmg
Date: 2007-08-17, Revised 2007-10-23
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Persistent link: http://EconPapers.repec.org/RePEc:pra:mprapa:5427

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