Multivariate Extremes at Work for Portfolio Risk Measurement
Finance, Vol. 23, No. 2, pp. 125-144, 2002
25 Pages Posted: 23 Sep 2008
Date Written: September, 23 2008
Abstract
This paper proposes a methodology to provide risk measures for portfolios during extreme events. The approach is based on splitting the multivariate extreme value distribution of the assets of the portfolio into two parts: the distributions of each asset and their dependence function. The estimation problem is also investigated. Then, stress-testing is applied for market indices portfolios and Monte-Carlo based risk measures - Value-at-Risk and Expected Shortfall - are provided.
Keywords: Finance
JEL Classification: G00
Suggested Citation: Suggested Citation
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