BFS 2002

Contributed Talk

Multivariate Extremes at Work for Portfolio Risk Measurement

Eric Bouyé

This paper proposes a methodology to provide risk measures for portfolios during extreme events. The approach is based on splitting the multivariate extreme value distribution of the assets of the portfolio into two parts: the distributions of each asset and their dependence function. The estimation problem is also investigated. Then, stress-testing is applied for market indices portfolios and Monte-Carlo based risk measures -- Value-at-Risk and Expected Shortfall -- are provided.