VaR-implied tail-correlation matrices : [Version October 2013]
- Empirical evidence suggests that asset returns correlate more strongly in bear markets than conventional correlation estimates imply. We propose a method for determining complete tail correlation matrices based on Value-at-Risk (VaR) estimates. We demonstrate how to obtain more efficient tail-correlation estimates by use of overidentification strategies and how to guarantee positive semidefiniteness, a property required for valid risk aggregation and Markowitz{type portfolio optimization. An empirical application to a 30-asset universe illustrates the practical applicability and relevance of the approach in portfolio management.
| Author: | Stefan MittnikORCiDGND |
|---|---|
| URN: | urn:nbn:de:hebis:30:3-324823 |
| Parent Title (German): | Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 2013,05 |
| Series (Serial Number): | CFS working paper series (2013, 05) |
| Publisher: | Center for Financial Studies |
| Place of publication: | Frankfurt, M. |
| Document Type: | Working Paper |
| Language: | English |
| Year of Completion: | 2013 |
| Year of first Publication: | 2013 |
| Publishing Institution: | Universitätsbibliothek Johann Christian Senckenberg |
| Release Date: | 2013/12/13 |
| Tag: | Downside risk; Estimation efficiency; Portfolio optimization; Positive semidefiniteness; Solvency II; Value-at-risk |
| Issue: | Version October 20, 2013 |
| Page Number: | 20 |
| HeBIS-PPN: | 349704708 |
| Institutes: | Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS) |
| Dewey Decimal Classification: | 3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft |
| JEL-Classification: | C Mathematical and Quantitative Methods / C1 Econometric and Statistical Methods: General / C10 General |
| Sammlungen: | Universitätspublikationen |
| Licence (German): |  Deutsches Urheberrecht |
