Robust value-at-risk: an information-theoretic approach

Joseph Simonian and Josh Davis

Applied Economics Letters, 2010, vol. 17, issue 16, 1551-1553

Abstract: We present a robust value-at-risk model that takes into account the possibility of model misspecification. In place of a single prior distribution, we utilize multiple priors in the form of an 'uncertainty set' around the estimated expected returns and covariance matrix, constructed using the information-theoretic notion of Kullback-Leibler divergence. An extension to conditional value-at-risk is also specified.

Date: 2010
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Persistent link: https://EconPapers.repec.org/RePEc:taf:apeclt:v:17:y:2010:i:16:p:1551-1553

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DOI: 10.1080/13504850903085019

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