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- Title
Does value-at-risk encourage diversification when losses follow tempered stable or more general Lévy processes?
- Authors
Grabchak, Michael
- Abstract
In this paper, we address the question of when portfolio selection based on Value-at-risk encourages diversification [in the sense of Ibragimov (Quant Financ 9(5):565-580, )]. Specifically, we give sufficient conditions for the case when losses follow a Lévy process. When the process has finite variation, these conditions are also necessary. We then specialize our results to the case when losses have tempered stable distributions.
- Subjects
PORTFOLIO diversification; VALUE at risk; ECONOMIC equilibrium; LEVY processes; INVESTMENTS; DISTRIBUTION (Economic theory)
- Publication
Annals of Finance, 2014, Vol 10, Issue 4, p553
- ISSN
1614-2446
- Publication type
Article
- DOI
10.1007/s10436-014-0249-6