On multivariate extensions of value-at-risk
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Abstract: In this paper, we introduce two alternative extensions of the classical univariate Value-at-Risk (VaR) in a multivariate setting. The two proposed multivariate VaR are vector-valued measures with the same dimension as the underlying risk portfolio. The lower-orthant VaR is constructed from level sets of multivariate distribution functions whereas the upper-orthant VaR is constructed from level sets of multivariate survival functions. Several properties have been derived. In particular, we show that these risk measures both satisfy the positive homogeneity and the translation invariance property. Comparison between univariate risk measures and components of multivariate VaR are provided. We also analyze how these measures are impacted by a change in marginal distributions, by a change in dependence structure and by a change in risk level. Illustrations are given in the class of Archimedean copulas.
The authors introduce two alternative extensions of the univariate value-at-risk (VaR) in a multivariate setting -- lower-orthant VaR and upper-orthant VaR. These are vector-valued measures with the same dimension as the underlying risk portfolio. The lower-orthant VaR is constructed from the level sets of multivariate distribution function. The upper-orthant VaR is based on level sets of multivariate survival functions. Positive homogeneity and translation invariance properties of both measures are derived. A comparison between univariate risk measures and components of multivariate VaR is provided. The authors also track the impact on these measures of a change in marginal distribution, in dependence structure and in risk level. Illustrations of the considered properties are provided in the class of Archimedean copulas.
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