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
Articolo in rivista - Articolo scientifico
Mixed Tempered Stable; Optimization; Risk parity; Decision Sciences (all); Management Science and Operations Research
English
375
393
19
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].
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/10281/180595
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