The Computation of Risk Budgets under the Lévy Process Assumption

Olivier Le Courtois and Christian Walter ()
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Olivier Le Courtois: EM - EMLyon Business School

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Abstract: This paper revisits the computation of Value-at-Risk and other risk indicators based on the use of Lévy processes. We first provide a new presentation of Variance Gamma Processes with Drift: we reconstruct them in an original way, starting from the exponential distribution. Then, we derive general Fourier formulas that allow us to compute VaR quickly and efficiently, but also other typical indicators like Tail Conditional Expectation (TCE). Based on such a formula, we conduct a study of the term structure of VaR, and provide a discussion of the Basle 2 and Solvency II agreements

Date: 2014-09-25
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-04506681v1
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Published in Finance, 2014, Vol. 35 (2), pp.87-108. ⟨10.3917/fina.352.0087⟩

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Related works:
Journal Article: The Computation of Risk Budgets under the Lévy Process Assumption (2014)
Working Paper: The Computation of Risk Budgets under the Lévy Process Assumption (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-04506681

DOI: 10.3917/fina.352.0087

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