On optimal portfolio diversification with respect to extreme risks

Mainik, Georg; Rüschendorf, Ludger

doi:10.1007/s00780-010-0122-z

Cited by 52 publications

(54 citation statements)

References 32 publications

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“…The following recent preprint came to our attention during the refereeing process, Mainik and Rüschendorf (2008), in which statistical estimation procedures for problems presented in Section 4 are discussed.…”

Section: Resultsmentioning

confidence: 99%

Multivariate extremes and the aggregation of dependent risks: examples and counter-examples

2008

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Section: Resultsmentioning

confidence: 99%

Multivariate extremes and the aggregation of dependent risks: examples and counter-examples

2008

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“…For DNB at the quantile level α = 99.97 %, we have α L + 6 = 1.1293. It is well known that the WDR may be larger than one, especially in the case of infinite mean models; see for instance (Ibragimov and Walden 2008) and (Mainik and Rüschendorf 2010). However, in the DNB example the marginal risks possess a finite expectation.…”

Section: Diversification Ratio and Diversification Benefitmentioning

confidence: 95%

Bounds on total economic capital: the DNB case study

Aas

Puccetti

2014

Extremes

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Most banks use the top-down approach to aggregate their risk types when computing total economic capital. Following this approach, marginal distributions for each risk type are first independently estimated and then merged into a joint model using a copula function. Due to lack of reliable data, banks tend to manually select the copula as well as its parameters. In this paper we assess the model risk related to the choice of a specific copula function. The aim is to compute upper and lower bounds on the total economic capital for the aggregate loss distribution of DNB, the largest Norwegian bank, and the key tool for computing these bounds is the Rearrangement Algorithm introduced in Embrechts et al. (J. Bank. Financ. 37(8):2750-2764. The application of this algorithm to a real situation poses a series of numerical challenges and raises a number of warnings which we illustrate and discuss.

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“…Under specific assumptions of interdependence among the risks, related results have been discussed in Asimit et al (2011) and in Mainik and Rüschendorf (2010). The same idea of "taking conditional expectations first" was also used in Dhaene et al (2008) to give an elegant and shorter proof for the expression that Landsman and Valdez (2002) derived for E[X k |S > VaR p [S]] (when (X 1 , X 2 , .…”

Section: Comments On Sectionmentioning

confidence: 95%

Discussion on “Asymptotic Analysis of Multivariate Tail Conditional Expectations,” by Li Zhu and Haijun Li, Volume 16(3)

Vanduffel

Yao

2013

North American Actuarial Journal

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On optimal portfolio diversification with respect to extreme risks

Abstract: Portfolio optimization, Risk management, Diversification effects, Multivariate extremes, 62G32, 62G05, 62G20, 62P05, C13, C14, G11,

Cited by 52 publications

References 32 publications

Multivariate extremes and the aggregation of dependent risks: examples and counter-examples

Multivariate extremes and the aggregation of dependent risks: examples and counter-examples

Bounds on total economic capital: the DNB case study

Discussion on “Asymptotic Analysis of Multivariate Tail Conditional Expectations,” by Li Zhu and Haijun Li, Volume 16(3)

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