A capital asset pricing model based on the value at risk under asymmetric Laplace distribution
Lili Wu,
Shulin Xu
Abstract:PurposeFinancial asset return series usually exhibit nonnormal characteristics such as high peaks, heavy tails and asymmetry. Traditional risk measures like standard deviation or variance are inadequate for nonnormal distributions. Value at Risk (VaR) is consistent with people's psychological perception of risk. The asymmetric Laplace distribution (ALD) captures the heavy-tailed and biased features of the distribution. VaR is therefore used as a risk measure to explore the problem of VaR-based asset pricing. A… Show more
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