Remarks on a copula‐based conditional value at risk for the portfolio problem

Andres Mauricio Molina Barreto and Naoyuki Ishimura

Intelligent Systems in Accounting, Finance and Management, 2023, vol. 30, issue 3, 150-170

Abstract: We deal with a multivariate conditional value at risk. Compared with the usual notion for the single random variable, a multivariate value at risk is concerned with several variables, and thus, the relation between each risk factor should be considered. We here introduce a new definition of copula‐based conditional value at risk, which is real valued and ready to be computed. Copulas are known to provide a flexible method for handling a possible nonlinear structure; therefore, copulas may be naturally involved in the theory of value at risk. We derive a formula of our copula‐based conditional value at risk in the case of Archimedean copulas, whose effectiveness is shown by examples. Numerical studies are also carried out with real data, which can be verified with analytical results.

Date: 2023
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