A duality approach to the worst case value at risk for a sum of dependent random variables with known covariances

Brice Franke and Michael Stolz

Papers from arXiv.org

Abstract: We propose an approach to the aggregation of risks which is based on estimation of simple quantities (such as covariances) associated to a vector of dependent random variables, and which avoids the use of parametric families of copulae. Our main result demonstrates that the method leads to bounds on the worst case Value at Risk for a sum of dependent random variables. Its proof applies duality theory for infinite dimensional linear programs.

Date: 2009-12
New Economics Papers: this item is included in nep-ecm and nep-rmg
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