Tail Risk Attribution

7 Pages Posted: 11 Aug 2011

Date Written: August 11, 2011

Abstract

Tail risk refers to the shape of the left tail of the distribution of investment returns. Return distributions are traditionally described in terms of their first for moments: mean return, volatility, skewness and kurtosis. Attribution is a descriptive approach used in portfolio analysis to explain a certain magnitude as the sum of contributions from portfolio constituents as well as contributions from constituent attributes. In this research note, we propose a tail risk attribution methodology which allows to explain portfolio modified value-at-risk in terms of contributions from assets as well as mean, volatility, skewness and kurtosis. The approach is free of any residuals.

Keywords: tail risk, attribution, modified VaR, value-at-risk, normal VaR, risk contribution, Euler theorem, linear homogeneous

Suggested Citation

Steiner, Andreas, Tail Risk Attribution (August 11, 2011). Available at SSRN: https://ssrn.com/abstract=1908148 or http://dx.doi.org/10.2139/ssrn.1908148

Andreas Steiner (Contact Author)

Andreas Steiner Consulting GmbH ( email )

Walderstrasse 43c
Hinwil, 8340
Switzerland

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