Subadditivity re–examined: the case for value-at-risk

Jon Danielsson, Bjørn Jørgensen, Sarma Mandira, Gennady Samorodnitsky and Casper de Vries

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: This paper explores the potential for violations of VaR subadditivity both theoretically and by simulations, and finds that for most practical applications VaR is subadditive. Hence, there is no reason to choose a more complicated risk measure than VaR, solely for reasons of coherence.

Keywords: value–at–risk; subadditivity; regular variation; tail index; heavy tailed distribution (search for similar items in EconPapers)
JEL-codes: G00 G18 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2005-10-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (20)

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http://eprints.lse.ac.uk/24668/ Open access version. (application/pdf)

Related works:
Working Paper: Subadditivity Re–Examined: the Case for Value-at-Risk (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:24668

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