TY - JOUR
T1 - Tail Value-at-Risk-Based Expectiles for Extreme Risks and Their Application in Distributionally Robust Portfolio Selections
AU - Chen, Haoyu
AU - Fan, Kun
N1 - Publisher Copyright:
© 2022 by the authors.
PY - 2023/1
Y1 - 2023/1
N2 - Empirical evidence suggests that financial risk has a heavy-tailed profile. Motivated by recent advances in the generalized quantile risk measure, we propose the tail value-at-risk (TVaR)-based expectile, which can capture the tail risk compared with the classic expectile. In addition to showing that the risk measure is well-defined, the properties of TVaR-based expectiles as risk measures were also studied. In particular, we give the equivalent characterization of the coherency. For extreme risks, usually modeled by a regularly varying survival function, the asymptotic expansion of a TVaR-based expectile (with respect to quantiles) was studied. In addition, motivated by recent advances in distributionally robust optimization in portfolio selections, we give the closed-form of the worst-case TVaR-based expectile based on moment information. Based on this closed form of the worst-case TVaR-based expectile, the distributionally robust portfolio selection problem is reduced to a convex quadratic program. Numerical results are also presented to illustrate the performance of the new risk measure compared with classic risk measures, such as tail value-at-risk-based expectiles.
AB - Empirical evidence suggests that financial risk has a heavy-tailed profile. Motivated by recent advances in the generalized quantile risk measure, we propose the tail value-at-risk (TVaR)-based expectile, which can capture the tail risk compared with the classic expectile. In addition to showing that the risk measure is well-defined, the properties of TVaR-based expectiles as risk measures were also studied. In particular, we give the equivalent characterization of the coherency. For extreme risks, usually modeled by a regularly varying survival function, the asymptotic expansion of a TVaR-based expectile (with respect to quantiles) was studied. In addition, motivated by recent advances in distributionally robust optimization in portfolio selections, we give the closed-form of the worst-case TVaR-based expectile based on moment information. Based on this closed form of the worst-case TVaR-based expectile, the distributionally robust portfolio selection problem is reduced to a convex quadratic program. Numerical results are also presented to illustrate the performance of the new risk measure compared with classic risk measures, such as tail value-at-risk-based expectiles.
KW - coherent risk measure
KW - distributionally robust optimization
KW - expectile
KW - heavy-tailed risks
KW - worst-case risk measure
UR - https://www.scopus.com/pages/publications/85145891854
U2 - 10.3390/math11010091
DO - 10.3390/math11010091
M3 - 文章
AN - SCOPUS:85145891854
SN - 2227-7390
VL - 11
JO - Mathematics
JF - Mathematics
IS - 1
M1 - 91
ER -