RT Report
T1 Differential equations connecting VaR and CVaR
A1 Balbás, Alejandro
A1 Balbás, Beatriz
A1 Balbás Aparicio, Raquel
AB The Value at Risk (VaR) is a very important risk measure for practitioners, supervisors and researchers. Many practitioners draw on VaR as a critical instrument in Risk Management and other Actuarial/Financial problems, while supervisors and regulators must deal with VaR due to the Basel Accords and Solvency II, among other reasons. From a theoretical point of view VaR presents some drawbacks overcome by other risk measures such as the Conditional Value at Risk (CVaR). VaR is neither di¤erentiable nor sub-additive because it is neither continuous nor convex. On the contrary, CVaR satisfies all of these properties, and this simplifies many analytical studies if VaR is replaced by CVaR. In this paper several di¤erential equations connecting both VaR and CVaR will be presented. They will allow us to address several important issues involving VaR with the help of the CVaR properties. This new methodology seems to be very e¢ cient. In particular, a new VaR Representation Theorem may be found, and optimization problems involving VaR or probabilistic constraints always have an equivalent di¤erentiable optimization problem. Applications in VaR, marginal VaR, CVaR and marginal CVaR estimates will be addressed as well. An illustrative actuarial numerical example will be given.
PB Universidad Carlos III de Madrid. Instituto para el Desarrollo Empresarial
SN 1989-8843
YR 2017
FD 2017
LK https://hdl.handle.net/20.500.14352/22962
UL https://hdl.handle.net/20.500.14352/22962
LA eng
NO Publicado como artículo de revista:Balbas, Alejandro & Balbás, Beatriz & Balbás, Raquel. (2017). Differential equations connecting VaR and CVaR. Journal of Computational and Applied Mathematics. 326. (2017) 247-267http://dx.doi.org/10.1016/j.cam.2017.05.037
DS Docta Complutense
RD 7 abr 2025