Sensitivity of portfolio VaR and CVaR to portfolio return characteristics

Stoyan Stoyanov (), Svetlozar Rachev () and Frank Fabozzi ()

Annals of Operations Research, 2013, vol. 205, issue 1, 169-187

Abstract: Risk management through marginal rebalancing is important for institutional investors due to the size of their portfolios. We consider the problem of improving marginally portfolio VaR and CVaR through a marginal change in the portfolio return characteristics. We study the relative significance of standard deviation, mean, tail thickness, and skewness in a parametric setting assuming a Student’s t or a stable distribution for portfolio returns. We also carry out an empirical study with the constituents of DAX30, CAC40, and SMI. Our analysis leads to practical implications for institutional investors and regulators. Copyright Springer Science+Business Media, LLC 2013

Keywords: Value-at-risk; Conditional value-at-risk; Student’s t distribution; Stable distributions; Marginal rebalancing (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (25)

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DOI: 10.1007/s10479-012-1142-1

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