On the uncertainty of VaR of individual risk

DOI10.1016/J.CAM.2019.112468MaRDI QIDQ2332768zbMATH OpenOpenAlexWikidataFDO

Authors K. C. Cheung, Fei Lung Yuen

Publication date 5 November 2019

Published in Journal of Computational and Applied Mathematics (Search for Journal in Brave)

Full work available at URL https://doi.org/10.1016/j.cam.2019.112468

zbMATH Keywords

confidence levelrobustnessuncertaintyvalue at riskworst scenario

Mathematics Subject Classification ID

Actuarial mathematics (91G05) Statistical methods; risk measures (91G70)

Review text

The authors study the effect of uncertainty on VaR by considering a set of uncertainty measures. Using the relationship between VaR and distribution function, they transform the non-convex VaR maximization problem to an associated convex optimization problem. The robust VaR and an associated worst scenario can then be identified. The robust VaR is found to be the VaR under the physical probability measure with a higher confidence level, and the adjustment on the confidence level is independent of the distribution of the loss. The worst scenarios obtained are concave distortions of the physical distribution. It is shown that the choice of the loss model is still important when there is an uncertainty model.

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Cited in

(11)

• Simulation methods for robust risk assessment and the distorted mix approach
• Pareto efficient buy and hold investment strategies under order book linked constraints
• Varying confidence levels for CVaR risk measures and minimax limits
• Risk metrics of loss function for uncertain system
• The financial measurement of VaR under the GARCH model based on empirical distribution
• On a subjective approach to risk measurement
• Uncertainty in historical value-at-risk: an alternative quantile-based risk measure
• Robustness in the optimization of risk measures
• Value at risk for confidence level quantifications in robust engineering optimization
• Uncertainty Comparison Between Value-at-Risk and Expected Shortfall
• Optimal Reinsurance Design under Ambiguity and Value-at-Risk Preference with Wasserstein and L ^k Distance Metrics

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