Abstract: The worst possible Value-at-Risk for a non-decreasing function of n dependent risks is known when n=2 or the copula of the portfolio is bounded from below. In this paper we analyze the properties of the dependence structures leading to this solution, in particular their form and the implied functional dependence between the marginals. Furthermore, we criticise the assumption of the worst possible scenario for VaR-based risk management and we provide an alternative approach supporting comonotonicity.
Worst VaR scenarios / PAUL EMBRECHTS; ANDREA HOEING; G. PUCCETTI. - In: INSURANCE MATHEMATICS & ECONOMICS. - ISSN 0167-6687. - ELETTRONICO. - 37:(2005), pp. 115-134. [10.1016/j.insmatheco.2005.01.006]
Worst VaR scenarios
PUCCETTI, GIOVANNI
2005
Abstract
Abstract: The worst possible Value-at-Risk for a non-decreasing function of n dependent risks is known when n=2 or the copula of the portfolio is bounded from below. In this paper we analyze the properties of the dependence structures leading to this solution, in particular their form and the implied functional dependence between the marginals. Furthermore, we criticise the assumption of the worst possible scenario for VaR-based risk management and we provide an alternative approach supporting comonotonicity.
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