Abstract
Portfolio risk estimation requires appropriate modeling of fat-tails and asymmetries in dependence in combination with a true downside risk measure. In this survey, we discuss computational aspects of a Monte Carlo based framework for risk estimation and risk capital allocation. We review different probabilistic approaches focusing on practical aspects of statistical estimation and scenario generation. We discuss value-at-risk and conditional value-at-risk and comment on the implications of using a fat-tailed Monte Carlo framework for the reliability of risk estimates including model risk and Monte Carlo variability.
Original language | English |
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Pages (from-to) | 103-120 |
Number of pages | 18 |
Journal | Studies in Nonlinear Dynamics and Econometrics |
Volume | 17 |
Issue number | 1 |
DOIs | |
State | Published - Feb 2013 |
Keywords
- Conditional value at risk
- Copula
- Fat-tailed models
- Monte Carlo
- Value at risk