On the asymptotics of value-at-risk for portfolio loss under bivariate Eyraud-Farlie-Gumbel-Morgenstern copula and heavy tails

Guo dong Xing, Xiaoli Gan, Xiaohu Li, Shanchao Yang

Research output: Contribution to journalArticlepeer-review

Abstract

In the setting of bivariate Eyraud-Farlie-Gumbel-Morgenstern copula and heavy tails characterized by the power law of tail decay, we give the asymptotics of value-at-risk for portfolio loss as the confidence level tends to one. It can be seen from the obtained asymptotics that diversification decreases the value-at-risk of portfolio loss for the tail index greater than one and increases the value-at-risk of portfolio loss for the tail index less than one. To illustrate the obtained results, a relevant example is shown.

Original languageEnglish
Pages (from-to)2462-2471
Number of pages10
JournalCommunications in Statistics: Simulation and Computation
Volume49
Issue number9
DOIs
StatePublished - 1 Sep 2020

Keywords

  • Bivariate Eyraud-Farlie-Gumbel-Morgenstern copula
  • Diversification
  • Portfolio loss
  • Power-law
  • Value-at-risk

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