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VaR bounds in models with partial dependence information on subgroups

VaR bounds in models with partial dependence information on subgroups AbstractWe derive improved estimates for the model risk of risk portfolios when additional to the marginals some partial dependence information is available.We consider models which are split into k subgroups and consider various classes of dependence information either within the subgroups or between the subgroups. As consequence we obtain improved VaR bounds for the joint portfolio compared to the case with only information on the marginals. Our paper adds to various recent approaches to obtain reliable and usable risk bounds resp. estimates of the model risk by including partial dependence information additional to the information on the marginals. In particular we extend an approach suggested in Bignozzi, Puccetti and Rüschendorf (2015) and in Puccetti, Rüschendorf, Small and Vanduffel (2017), which is based on positive dependence resp. on independence information available for some subgroups. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Dependence Modeling de Gruyter

VaR bounds in models with partial dependence information on subgroups

Dependence Modeling , Volume 5 (1): 16 – Jan 26, 2017

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Publisher
de Gruyter
Copyright
© 2017
ISSN
2300-2298
eISSN
2300-2298
DOI
10.1515/demo-2017-0004
Publisher site
See Article on Publisher Site

Abstract

AbstractWe derive improved estimates for the model risk of risk portfolios when additional to the marginals some partial dependence information is available.We consider models which are split into k subgroups and consider various classes of dependence information either within the subgroups or between the subgroups. As consequence we obtain improved VaR bounds for the joint portfolio compared to the case with only information on the marginals. Our paper adds to various recent approaches to obtain reliable and usable risk bounds resp. estimates of the model risk by including partial dependence information additional to the information on the marginals. In particular we extend an approach suggested in Bignozzi, Puccetti and Rüschendorf (2015) and in Puccetti, Rüschendorf, Small and Vanduffel (2017), which is based on positive dependence resp. on independence information available for some subgroups.

Journal

Dependence Modelingde Gruyter

Published: Jan 26, 2017

References