Dependence structure of risk factors and diversification effects

Chen Zhou ()

Insurance: Mathematics and Economics, 2010, vol. 46, issue 3, 531-540

Abstract: In this paper, we study the aggregated risk from dependent risk factors under the multivariate Extreme Value Theory (EVT) framework. We consider the heavy-tailedness of the risk factors as well as the non-parametric tail dependence structure. This allows a large range of models on the dependence. We assess the Value-at-Risk of a diversified portfolio constructed from dependent risk factors. Moreover, we examine the diversification effects under this setup.

Keywords: Aggregated; risk; Diversification; effect; Multivariate; extreme; value; theory (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (23)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:insuma:v:46:y:2010:i:3:p:531-540

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