A Fourier Approach to the Computation of Conditional Value-at-Risk and Optimized Certainty Equivalents

28 Pages Posted: 9 Jun 2016

See all articles by Samuel Drapeau

Samuel Drapeau

China Academy of Financial Research (SAIF) and School of Mathematical Sciences

Michael Kupper

University of Konstanz

Antonis Papapantoleon

Technische Universität Berlin (TU Berlin)

Date Written: August 29, 2014

Abstract

We consider the class of risk measures associated with optimized certainty equivalents. This class includes several popular examples, such as conditional value-at-risk (CVaR) and monotone mean–variance. Numerical schemes are developed for the computation of these risk measures using Fourier transform methods. This leads, in particular, to a very competitive method for the calculation of CVaR, which is comparable in computational time to the calculation of VaR. We also develop methods for the efficient computation of risk contributions.

Keywords: conditional value-at-risk, Fourier approach, optimized certainty equivalents

Suggested Citation

Drapeau, Samuel and Kupper, Michael and Papapantoleon, Antonis, A Fourier Approach to the Computation of Conditional Value-at-Risk and Optimized Certainty Equivalents (August 29, 2014). Journal of Risk, Vol. 16, No. 6, 2014, Available at SSRN: https://ssrn.com/abstract=2791432

Samuel Drapeau

China Academy of Financial Research (SAIF) and School of Mathematical Sciences ( email )

Shanghai Jiao Tong University
211 West Huaihai Road
Shanghai, 200030
China

HOME PAGE: http://www.samuel-drapeau.info

Michael Kupper (Contact Author)

University of Konstanz ( email )

Fach D-144
Universitätsstraße 10
Konstanz, D-78457
Germany

Antonis Papapantoleon

Technische Universität Berlin (TU Berlin)

Straße des 17
Juni 135
Berlin, 10623
Germany

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