On a transform method for the efficient computation of conditional V\@R (and V\@R) with application to loss models with jumps and stochastic volatility

DOI10.1007/S11009-015-9446-7zbMATH Open1338.91155arXiv1407.1072OpenAlexW1655714305MaRDI QIDQ292380FDOQ292380

Authors: Alessandro Ramponi 

Publication date: 8 June 2016

Published in: Methodology and Computing in Applied Probability (Search for Journal in Brave)

Abstract: In this paper we consider Fourier transform techniques to efficiently compute the Value-at-Risk and the Conditional Value-at-Risk of an arbitrary loss random variable, characterized by having a computable generalized characteristic function. We exploit the property of these risk measures of being the solution of an elementary optimization problem of convex type in one dimension for which Fast and Fractional Fourier transform can be implemented. An application to univariate loss models driven by L'{e}vy or stochastic volatility risk factors dynamic is finally reported.

Full work available at URL: https://arxiv.org/abs/1407.1072

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zbMATH Keywords

stochastic volatilityCV\@RFourier transform methodsjump-diffusion modelsV\@R

Mathematics Subject Classification ID

Numerical methods (including Monte Carlo methods) (91G60) Statistical methods; risk measures (91G70) Numerical methods for trigonometric approximation and interpolation (65T40)

Cites Work

• The scaling and squaring method for the matrix exponential revisited
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• Title not available (Why is that?)
• Arbitrage Theory in Continuous Time
• Stochastic finance. An introduction in discrete time
• Implementing models in quantitative finance: methods and cases
• Complex logarithms in Heston-like models
• Efficient VaR and expected shortfall computations for nonlinear portfolios within the delta-gamma approach
• Analytical value-at-risk with jumps and credit risk
• Conditional value-at-risk bounds for compound Poisson risks and a normal approximation
• Fourier transform methods for regime-switching jump-diffusions and the pricing of forward starting options
• A generalized Fourier transform approach to risk measures
• Fourier inversion formulas in option pricing and insurance

Cited In (6)

• Efficient VaR and expected shortfall computations for nonlinear portfolios within the delta-gamma approach
• Computation of market risk measures with stochastic liquidity horizon
• Conditional VaR based on two-dimensional normal distribution
• A new Fourier transform algorithm for value-at-risk
• An analytical evaluation method of the operational risk using fast wavelet expansion techniques
• A generalized Fourier transform approach to risk measures

Uses Software

• MATLAB expm

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