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The Study of Decomposing Portfolio Value-at-Risk Based on Non-normal Distribution

Xinlin Wu

Abstract


Many methods are focused on the estimation of portfolio’s Value-at-Risk, but little about decomposing portfolio VaR. There is an need for more information about marginal VaR, component VaR and incremental VaR to measure the risk availably. A method for decomposing portfolio VaR based on a non-normal distribution is proposed in this paper. The results are consistent with decomposing of portfolio under the hypotheses of normal distribution. Finally, an empirical study is given to verify the effectiveness.

Keywords


Value-at-Risk, marginal VaR, component VaR, incremental VaR, g-h distribution

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