Tail Risk and Pk-Tail Risk

Gonçalves, Carlos Pedro dos Santos; Ferreira, Miguel A.

doi:10.2139/ssrn.639181

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Tail Risk and Pk-Tail Risk

29 Pages Posted: 22 Dec 2004

See all articles by Carlos Pedro dos Santos Gonçalves

Carlos Pedro dos Santos Gonçalves

Lusophone University of Humanities and Technologies

Miguel A. Ferreira

Nova School of Business and Economics; European Corporate Governance Institute (ECGI); Centre for Economic Policy Research (CEPR)

Date Written: December 2004

Abstract

This paper discusses the notion of tail risk, and the ability of a tail risk measure to reflect this kind of risk. In particular, Yamai and Yoshiba's (2001, 2002) notion of strict risk measure tail risk is discussed and linked with a different notion of tail risk, the pK-tail risk, which is the risk associated with the probability measure conditional on the event that the losses are at least as large as K. A subset of pK-tail risk measures that are free of strict risk measure tail risk is introduced. These notions are then extended to Yaari's (1987) dual theory and the distorted risk measures framework.

Keywords: Tail risk, pK-tail risk, Yaari's dual theory, distorted risk measures, premium principles

JEL Classification: D81, G10, G22

Suggested Citation: Suggested Citation

Gonçalves, Carlos Pedro dos Santos and Ferreira, Miguel Almeida, Tail Risk and Pk-Tail Risk (December 2004). Available at SSRN: https://ssrn.com/abstract=639181 or http://dx.doi.org/10.2139/ssrn.639181