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Subadditivity re–examined: the case for value-at-risk

Danielsson, Jon, Jorgensen, Bjørn N., Mandira, Sarma, Samorodnitsky, Gennady and Vries, C. G. de (2005) Subadditivity re–examined: the case for value-at-risk. Discussion paper, 549. Financial Markets Group, London School of Economics and Political Science, London, UK.

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Abstract

This paper explores the potential for violations of VaR subadditivity both theoretically and by simulations, and finds that for most practical applications VaR is subadditive. Hence, there is no reason to choose a more complicated risk measure than VaR, solely for reasons of coherence.

Item Type: Monograph (Discussion Paper)
Official URL: http://fmg.lse.ac.uk
Additional Information: © 2005 The Authors
Library of Congress subject classification: H Social Sciences > HG Finance
H Social Sciences > HB Economic Theory
Sets: Research centres and groups > Financial Markets Group (FMG)
Collections > Economists Online
Collections > LSE Financial Markets Group (FMG) Working Papers
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Identification Number: 549
Date Deposited: 30 Jul 2009 11:52
URL: http://eprints.lse.ac.uk/24668/

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