In this paper we discuss a detailed methodology for dealing with Risk parity in a parametric context. In particular, we use the Independent Component Analysis for a linear decomposition of portfolio risk factors. Each Independent Component is modeled with the Mixed Tempered Stable distribution. Risk parity optimal portfolio weights are calculated for three risk measures: Volatility, modified Value At Risk and modified Expected Shortfall. Empirical analysis is discussed in terms of out-of-sample performance and portfolio diversification
Mercuri, L., Rroji, E. (2018). Risk parity for Mixed Tempered Stable distributed sources of risk. ANNALS OF OPERATIONS RESEARCH, 260(1-2), 375-393 [10.1007/s10479-016-2394-y].
Risk parity for Mixed Tempered Stable distributed sources of risk
Mercuri, L;Rroji, E.
2018
Abstract
In this paper we discuss a detailed methodology for dealing with Risk parity in a parametric context. In particular, we use the Independent Component Analysis for a linear decomposition of portfolio risk factors. Each Independent Component is modeled with the Mixed Tempered Stable distribution. Risk parity optimal portfolio weights are calculated for three risk measures: Volatility, modified Value At Risk and modified Expected Shortfall. Empirical analysis is discussed in terms of out-of-sample performance and portfolio diversification
I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.
