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

Bouyé, Eric, Multivariate Extremes at Work for Portfolio Risk Measurement (September, 23 2008). Finance, Vol. 23, No. 2, pp. 125-144, 2002 , Available at SSRN: https://ssrn.com/abstract=1272351

Eric Bouyé (Contact Author)

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States