Asymptotic risk decomposition for regularly varying distributions with tail dependence

Eglė Jaunė and Jonas Šiaulys

Applied Mathematics and Computation, 2022, vol. 427, issue C

Abstract: In this paper we investigate the limiting behaviour of Conditional Tail Expectation (CTE) and its decomposition for a sum of real-valued tail-dependent random variables with regularly varying distributions. Asymptotic proportions to the corresponding Value at Risk (VaR) measures are obtained for a flexible dependence structure. For a certain practical case considering an investment portfolio exact formulas are derived and sensitivity to model parameters is analysed. We also carry out a simulation study verifying our results and revealing the speed of convergence for different values of parameters.

Keywords: Asymptotic risk decomposition; Regular variation; Tail dependence; Value at risk; Capital allocation; Conditional tail expectation (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0096300322002247
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:apmaco:v:427:y:2022:i:c:s0096300322002247

DOI: 10.1016/j.amc.2022.127164

Access Statistics for this article

Applied Mathematics and Computation is currently edited by Theodore Simos

More articles in Applied Mathematics and Computation from Elsevier
Bibliographic data for series maintained by Catherine Liu ().