Sensitivity of portfolio VaR and CVaR to portfolio return characteristics

Stoyan V. Stoyanov, Svetlozar T. Rachev, Frank J. Fabozzi

Research output: Contribution to journalArticle

18 Scopus citations

Abstract

Risk management through marginal rebalancing is important for institutional investors due to the size of their portfolios. We consider the problem of improving marginally portfolio VaR and CVaR through a marginal change in the portfolio return characteristics. We study the relative significance of standard deviation, mean, tail thickness, and skewness in a parametric setting assuming a Student's t or a stable distribution for portfolio returns. We also carry out an empirical study with the constituents of DAX30, CAC40, and SMI. Our analysis leads to practical implications for institutional investors and regulators.

Original languageEnglish
Pages (from-to)169-187
Number of pages19
JournalAnnals of Operations Research
Volume205
Issue number1
DOIs
StatePublished - 2013

Keywords

  • Conditional value-at-risk
  • Marginal rebalancing
  • Stable distributions
  • Student's t distribution
  • Value-at-risk

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