Risk Capital Allocation Based on Minimal Excess Principle Constrained by Expected Shortfall in Chinese Market

Chengli Zheng () and Feng Gao ()
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Chengli Zheng: Huazhong Normal University
Feng Gao: Huazhong Normal University

A chapter in LISS 2014, 2015, pp 903-910 from Springer

Abstract: Abstract The risk capital allocation problem comes from the diversification of one portfolio. In this paper, we combine the minimal excess principle and expected shortfall into capital allocation with Chinese market portfolio data. And the loss distributions are estimated through extreme value theory which is suitable for the property of fat tail. Our idea satisfies the requirements of coherent risk measure and capital allocation rules. Comparing with two other allocation rules, the result turns out that our allocation can be more efficient, more precise and fairer.

Keywords: Risk capital allocation; Minimal excess principle; Expected shortfall (search for similar items in EconPapers)
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-662-43871-8_130

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DOI: 10.1007/978-3-662-43871-8_130

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