Financial Interpretation of Risk Decomposition

DOI

10.2991/icssr-13.2013.94How to use a DOI?

Keywords

financial interpretation; loss contribution; volatility; value at risk; expected shortfall

Abstract

Risk decomposition is very significant for portfolio risk allocation as well as risk monitoring. However, the validity of risk decomposition has long been questioned because it does not have a solid financial interpretation. This paper summarizes and modifies the financial interpretation of risk decomposition in terms of standard deviation, value at risk (VaR) and expected shortfall (ES) from references and performs empirical analysis of each risk measure. The conclusion is that all the risk decomposition in terms of standard deviation, VaR and ES can be interpreted by the corresponding loss contribution.

Copyright

© 2013, the Authors. Published by Atlantis Press.

Open Access

This is an open access article distributed under the CC BY-NC license (http://creativecommons.org/licenses/by-nc/4.0/).

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TY  - CONF
AU  - Xiaodan Zou
PY  - 2013/07
DA  - 2013/07
TI  - Financial Interpretation of Risk Decomposition
BT  - Proceedings of the 2nd International Conference on Science and Social Research (ICSSR 2013)
PB  - Atlantis Press
SP  - 412
EP  - 415
SN  - 1951-6851
UR  - https://doi.org/10.2991/icssr-13.2013.94
DO  - 10.2991/icssr-13.2013.94
ID  - Zou2013/07
ER  -