Value at Risk Bounds for Portfolios of Non-Normal Returns

U. of Turin Statistics and Mathematics Working Paper

22 Pages Posted: 23 Jun 2001

See all articles by Elisa Luciano

Elisa Luciano

Collegio Carlo Alberto; University of Turin - Department of Statistics and Applied Mathematics

Marina Marena

University of Eastern Piedmont

Date Written: April 1, 2001

Abstract

This paper studies Value at Risk (VaR) bounds for sums of stochastically dependent random variables, i.e. portfolios of correlated financial assets. The bounds hold under no restrictions on the dependence or on the marginal distributions of returns. An improvement of the bounds is given for positive (quadrant) dependent rvs. Both sets of bounds are computed for portfolios of 6 international indices. Backtesting confirms the usefulness of the approach, even with respect to other shortcuts, such as the normality assumption. For small portfolios, bounds are not over conservative.

Keywords: Value at Risk, Non-normal returns

Suggested Citation

Luciano, Elisa and Marena, Marina, Value at Risk Bounds for Portfolios of Non-Normal Returns (April 1, 2001). U. of Turin Statistics and Mathematics Working Paper, Available at SSRN: https://ssrn.com/abstract=274608 or http://dx.doi.org/10.2139/ssrn.274608

Elisa Luciano

Collegio Carlo Alberto ( email )

via Real Collegio 30
Moncalieri, Torino 10024
Italy

HOME PAGE: http://www.carloalberto.org/people/faculty/fellows/luciano/

University of Turin - Department of Statistics and Applied Mathematics ( email )

Corso Unione Sovietica 218 bis
Turin, I-10122
Italy
+ 39 011 6705230 (Phone)

Marina Marena (Contact Author)

University of Eastern Piedmont ( email )

Corso Borsalino 50
Department of Economics and Quantitative Methods
15100 Alessandria
Italy
+39 011 6706275 (Phone)

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
474
Abstract Views
1,853
rank
78,866
PlumX Metrics