A generalized Fourier transform approach to risk measures
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Publication:3301115
DOI10.1088/1742-5468/2010/01/P01005zbMATH Open1456.91128arXiv0909.3978OpenAlexW2125846159MaRDI QIDQ3301115FDOQ3301115
Authors: V. Cazzola, Giacomo Livan, Guido Montagna, Oreste Nicrosini, Giacomo Bormetti 
Publication date: 11 August 2020
Published in: Journal of Statistical Mechanics: Theory and Experiment (Search for Journal in Brave)
Abstract: We introduce the formalism of generalized Fourier transforms in the context of risk management. We develop a general framework to efficiently compute the most popular risk measures, Value-at-Risk and Expected Shortfall (also known as Conditional Value-at-Risk). The only ingredient required by our approach is the knowledge of the characteristic function describing the financial data in use. This allows to extend risk analysis to those non-Gaussian models defined in the Fourier space, such as Levy noise driven processes and stochastic volatility models. We test our analytical results on data sets coming from various financial indexes, finding that our predictions outperform those provided by the standard Log-Normal dynamics and are in remarkable agreement with those of the benchmark historical approach.
Full work available at URL: https://arxiv.org/abs/0909.3978
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Cited In (6)
- On the applicability of a Fourier based approach to integrated market and credit portfolio models
- Accounting for risk of non linear portfolios. A novel Fourier approach
- 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
- Harmonic analysis in value at risk calculations.
- Bayesian Risk Measures for Derivatives via Random Esscher Transform
- Risk Measures and Asset Pricing Models with New Versions of Wang Transform
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