Sensitivity analysis of Mixed Tempered Stable parameters with implications in portfolio optimization

Asmerilda Hitaj, Lorenzo Mercuri () and Edit Rroji
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Asmerilda Hitaj: University of Milano-Bicocca
Lorenzo Mercuri: University of Milan
Edit Rroji: University of Milano-Bicocca

Computational Management Science, 2019, vol. 16, issue 1, No 5, 95 pages

Abstract: Abstract This paper investigates the use, in practical financial problems, of the Mixed Tempered Stable distribution both in its univariate and multivariate formulation. In the univariate context, we study the dependence of a given coherent risk measure on the distribution parameters. The latter allows to identify the parameters that seem to have a greater influence on the given measure of risk. The multivariate Mixed Tempered Stable distribution enters in a portfolio optimization problem built considering a real market dataset of seventeen hedge fund indexes. We combine the flexibility of the multivariate Mixed Tempered Stable distribution, in capturing different tail behaviors, with the ability of the ARMA-GARCH model in capturing the time dependence observed in the data.

Keywords: Mixed Tempered Stable distribution; Sensitivity analysis; Portfolio optimization (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (2)

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DOI: 10.1007/s10287-018-0306-0

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