On the Non-Existence of Conditional Value-at-Risk under Heavy Tails and Short Sales

Posted: 25 Feb 2009 Last revised: 2 Mar 2009

See all articles by Gunter Bamberg

Gunter Bamberg

University of Augsburg - Department of Statistics and Mathematical Economic Theory

Andreas Neuhierl

University of Notre Dame - Department of Finance

Date Written: February 25, 2009

Abstract

Value-at-Risk (VaR) and conditional value-at-risk (CVaR) are important risk measures. Especially VaR is very popular and widespread in risk management and banking supervision. However, VaR has some unwelcome properties which are not shared by CVaR. Therefore CVaR is preferable from a theoretical point of view. Both VaR and CVaR are discussed for long and short positions. It is pointed out that short positions and heavy tails are incompatible with a finite CVaR.

Keywords: Conditional value-at-risk, Value-at-risk, Heavy tails

Suggested Citation

Bamberg, Gnnter and Neuhierl, Andreas, On the Non-Existence of Conditional Value-at-Risk under Heavy Tails and Short Sales (February 25, 2009). OR Spectrum, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1348987

Gnnter Bamberg (Contact Author)

University of Augsburg - Department of Statistics and Mathematical Economic Theory ( email )

Augsburg, 86135
Germany

Andreas Neuhierl

University of Notre Dame - Department of Finance ( email )

P.O. Box 399
Notre Dame, IN 46556-0399
United States

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