Risk Measurement Using the Mixed Tempered Stable Distribution

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

A chapter in Mathematical and Statistical Methods for Actuarial Sciences and Finance, 2014, pp 137-140 from Springer

Abstract: Abstract The Mixed Tempered Stable distribution (MixedTS) recently introduced has as special cases parametric distributions used in asset return modelling such as the Variance Gamma (VG) and Tempered Stable. In this paper, we start from this flexible distribution and compare the historical estimates for the two homogeneous risk measures with the quantities obtained using direct numerical integration and the saddle-point approximation. The homogeneity property enables us to go further and look for the most important sources of risk. Although risk decomposition in a parametric context is not straightforward, modified versions of VaR and ES based on asymptotic expansions simplify the problem.

Keywords: MixedTS; Homogeneity; Risk decomposition (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-319-05014-0_32

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DOI: 10.1007/978-3-319-05014-0_32

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