CVaR sensitivity with respect to tail thickness

Stoyan V. Stoyanov, Svetlozar T. Rachev and Frank Fabozzi (frank.fabozzi@edhec.edu)

Journal of Banking & Finance, 2013, vol. 37, issue 3, 977-988

Abstract: The sensitivity of a risk measure with respect to the parameters of the hypothesized distribution is a useful tool in investigating the impact of marginal rebalancing decisions on the portfolio return distribution and also in the analysis of the asymptotic variability of the risk estimator. We calculate the relative importance of the conditional value-at-risk (CVaR) sensitivity with respect to tail thickness and scale of the portfolio return distribution in the case of regularly varying tails and in the case of exponential and faster-than-exponential decay. We discuss the implications for asset return modeling and the asymptotic variability of the risk estimator.

Keywords: Fat-tailed distributions; Regularly varying tails; Conditional value-at-risk; Marginal rebalancing; Asymptotic variability (search for similar items in EconPapers)
JEL-codes: C46 G11 G17 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:37:y:2013:i:3:p:977-988

DOI: 10.1016/j.jbankfin.2012.11.010

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