VaR and ES for linear portfolios with mixture of generalized Laplace distributions risk factors

Jules Sadefo-Kamdem
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Jules Sadefo-Kamdem: LAMETA - Laboratoire Montpelliérain d'Économie Théorique et Appliquée - UM1 - Université Montpellier 1 - UPVM - Université Paul-Valéry - Montpellier 3 - INRA - Institut National de la Recherche Agronomique - Montpellier SupAgro - Centre international d'études supérieures en sciences agronomiques - UM - Université de Montpellier - CNRS - Centre National de la Recherche Scientifique - Montpellier SupAgro - Institut national d’études supérieures agronomiques de Montpellier
Authors registered in the RePEc Author Service: Jules SADEFO KAMDEM

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Abstract: In this paper, we propose an explicit estimation of Value-at-Risk (VaR) and Expected Shortfall (ES) for linear portfolios when the risk factors change with a convex mixture of generalized Laplace distributions (M-GLD). We introduce the dynamics Delta-GLD-VaR, Delta-GLD-ES, Delta-MGLD-VaR and Delta-MGLD-ES, by using conditional correlation multivariate GARCH. The generalized Laplace distribution impose less restrictive assumptions during estimation that should improve the precision of the VaR and ES through the varying shape and fat tails of the risk factors in relation with the historical sample data. We also suggested some areas of application to measure price risk in agriculture, risk management and financial portfolio optimization.

Keywords: Capital allocation; Dynamic volatility; Risk management; Price risk in agriculture; Expected Shortfall (search for similar items in EconPapers)
Date: 2012-02
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Published in Annals of Finance, 2012, 8 (1), pp.123-150. ⟨10.1007/s10436-009-0138-6⟩

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Journal Article: VaR and ES for linear portfolios with mixture of generalized Laplace distributions risk factors (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-02901914

DOI: 10.1007/s10436-009-0138-6

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