Framework for VAR allocation among traders
Brian, I have a question on your paper: If you use skewness and kurtosis in the VaR calculation, you want to make sure: 1. these are exist if the underlying distribution is non-normal. 2. your sample skewness and kurtosis is good estimates of true skewness and hurtosis. In part 5 you discussed the Robust estimation but it could be stronger argument IMHO. For example, do you have convergence/sensitivity analysis on estimated skewness/kurtosis results for your cleaning method? Thanks, E wang
--- "Brian G. Peterson" <brian at braverock.com> wrote:
On Thursday 13 March 2008 22:32:59 adschai at optonline.net wrote:
Hi,I'm looking for VAR allocation framework among
traders. I saw some
papers but none of which (at least that I saw)
look practical. I am
wondering if anyone can hint me some idea or some
reference? The situation
is if at the desk level you were given a certain
amount of VAR limit, how
should one allocate the number among traders?
THank you.adschai Calculate Component VaR. The first definition (as far as I know) is in Garman in Risk Magazine. The article may be found here: Garman, Mark, "Taking VaR to Pieces (Component VaR)," RISK 10, 10, October 1997. http://www.fea.com/pdf/componentvar.pdf He also has a longer working paper on the topic here:
http://www.gloriamundi.org/detailpopup.asp?ID=453055537
We implemented Component VaR for assets with non-normal distribution in our recent paper here: Boudt, Kris, Peterson, Brian G. and Croux, Christophe, "Estimation and Decomposition of Downside Risk for Portfolios With Non-Normal Returns" (October 31, 2007). http://ssrn.com/abstract=1024151 All code for our paper was implemented in R, and is available. We will also be cleaning up and documenting the functions in the next version of PerformanceAnalytics. Regards, - Brian
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