Resource title

Portfolio value at risk based on independent components analysis

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image for OpenScout resource :: Portfolio value at risk based on independent components analysis

Resource description

Risk management technology applied to high dimensional portfolios needs simple and fast methods for calculation of Value-at-Risk (VaR). The multivariate normal framework provides a simple off-the-shelf methodology but lacks the heavy tailed distributional properties that are observed in data. A principle component based method (tied closely to the elliptical structure of the distribution) is therefore expected to be unsatisfactory. Here we propose and analyze a technology that is based on Independent Component Analysis (ICA). We study the proposed ICVaR methodology in an extensive simulation study and apply it to a high dimensional portfolio situation. Our analysis yields very accurate VaRs.

Resource author

Ying Chen, Wolfgang Karl Härdle, Vladimir Spokoiny

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Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/25079

Resource license

Adapt according to the presented license agreement and reference the original author.