A directional multivariate value at risk

DOI10.1016/J.INSMATHECO.2015.09.002MaRDI QIDQ896753zbMATH OpenOpenAlexFDO

Authors Raúl Torres, Henry Laniado, Rosa E. Lillo

Publication date 14 December 2015

Published in Insurance Mathematics \& Economics (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1502.00908

zbMATH Keywords

copulavalue at riskmultivariate quantiledirectional approachmultivariate risks

Mathematics Subject Classification ID

Probability distributions: general theory (60E05) Asymptotic properties of nonparametric inference (62G20) Characterization and structure theory for multivariate probability distributions; copulas (62H05) Statistical methods; risk measures (91G70) Inequalities; stochastic orderings (60E15)

Abstract: In economics, insurance and finance, value at risk (VaR) is a widely used measure of the risk of loss on a specific portfolio of financial assets. For a given portfolio, time horizon, and probability $alpha$, the $100alpha\mathrm{\%}$ VaR is defined as a threshold loss value, such that the probability that the loss on the portfolio over the given time horizon exceeds this value is $alpha$. That is to say, it is a quantile of the distribution of the losses, which has both good analytic properties and easy interpretation as a risk measure. However, its extension to the multivariate framework is not unique because a unique definition of multivariate quantile does not exist. In the current literature, the multivariate quantiles are related to a specific partial order considered in $mathbb{R}^n$, or to a property of the univariate quantile that is desirable to be extended to $mathbb{R}^n$. In this work, we introduce a multivariate value at risk as a vector-valued directional risk measure, based on a directional multivariate quantile, which has recently been introduced in the literature. The directional approach allows the manager to consider external information or risk preferences in her/his analysis. We have derived some properties of the risk measure and we have compared the univariate extit{VaR} over the marginals with the components of the directional multivariate VaR. We have also analyzed the relationship between some families of copulas, for which it is possible to obtain closed forms of the multivariate VaR that we propose. Finally, comparisons with other alternative multivariate VaR given in the literature, are provided in terms of robustness.

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Cited in

(26)

• Bivariate lower and upper orthant value-at-risk
• PRINCIPAL COMPONENT VALUE AT RISK
• Marginal M-quantile regression for multivariate dependent data
• MULTIVARIATE GEOMETRIC TAIL- AND RANGE-VALUE-AT-RISK
• Monge-Kantorovich superquantiles and expected shortfalls with applications to multivariate risk measurements
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• Vector-valued multivariate conditional value-at-risk
• A multivariate quantile based on Kendall ordering

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