Research and publications

Sensitivity of portfolio VaR and CVaR to portfolio return characteristics

Risk management through marginal rebalancing is important for institutional investors due to the size of their portfolios. This paper considers the problem of marginally improving portfolio VaR and CVaR through a marginal change in the portfolio return characteristics. It studies 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. A revisited version of this paper was published in the May 2013 issue of Annals of Operations Research.

Author(s):

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

Summary:

Risk management through marginal rebalancing is important for institutional investors due to the size of their portfolios. This paper considers the problem of marginally improving portfolio VaR and CVaR through a marginal change in the portfolio return characteristics. It studies 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. A revisited version of this paper was published in the May 2013 issue of Annals of Operations Research.

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Type :	Working paper
Date :	13/01/2012
Keywords :	Risk Management

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