Introducing Variety in Risk Management

Fabrizio Lillo, Rosario N. Mantegna, Jean-Philippe Bouchaud and Marc Potters
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Fabrizio Lillo: Observatory of Complex Systems, Palermo University
Rosario N. Mantegna: Observatory of Complex Systems, Palermo University
Jean-Philippe Bouchaud: Science & Finance, Capital Fund Management
Marc Potters: Science & Finance, Capital Fund Management

No 107208, Science & Finance (CFM) working paper archive from Science & Finance, Capital Fund Management

Abstract: We review the recently introduced concept of variety of a financial portfolio and we sketch its importance for risk control purposes. The empirical behaviour of variety, correlation, exceedance correlation and asymmetry of the probability density function of daily returns is discussed. The results obtained are compared with the ones of a one-factor model showing strengths and limitations of this model.

JEL-codes: G1 G14 (search for similar items in EconPapers)
Date: 2001-07
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Forthcoming in Wilmmot Magazine

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Persistent link: http://EconPapers.repec.org/RePEc:sfi:sfiwpa:0107208

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