A Worst-Case Risk Measure by G-VaR

25 Pages Posted: 6 Jun 2019 Last revised: 29 Oct 2020

See all articles by Ziting Pei

Ziting Pei

Soochow University

Xishun Wang

affiliation not provided to SSRN

Yuhong Xu

Soochow university

Xingye Yue

affiliation not provided to SSRN

Date Written: June 4, 2018

Abstract

A kind of worst-case value-at-risk, GVaR, is defined to measure risk incorporating model uncertainty. Compared with most extant notions of worst-case VaR, GVaR can be computed by an explicit formula, and can be applied to large portfolios of several hundreds dimensions with low computational cost. It is robust for, but not limited to a set of VaRs based on normal distributions. We also reveal connections to robust portfolio optimization, which provides a tractable way to give optimal allocations under market ambiguity. Empirical analysis demonstrates that GVaR is a reliably robust risk measure.

Keywords: worst-case value-at-risk, portfolio management, G-normal distribution

JEL Classification: C6

Suggested Citation

Pei, Ziting and Wang, Xishun and Xu, Yuhong and Yue, Xingye, A Worst-Case Risk Measure by G-VaR (June 4, 2018). Available at SSRN: https://ssrn.com/abstract=3390968 or http://dx.doi.org/10.2139/ssrn.3390968

Ziting Pei

Soochow University

No. 1 Shizi Street
Taipei, Jiangsu 215006
Taiwan

Xishun Wang

affiliation not provided to SSRN

Yuhong Xu (Contact Author)

Soochow university ( email )

No. 1 Shizi Street
Suzhou, Jiangsu 215006
China

HOME PAGE: http://web.suda.edu.cn/yhxu/

Xingye Yue

affiliation not provided to SSRN ( email )

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