Tail risk hedging and regime switching


Huggenberger, Markus ; Albrecht, Peter ; Pekelis, Alexandr

This is the latest version of this item.


[img] PDF
mm186.pdf - Published
Restricted to Staff of the repository only

Download (624kB)

URL: https://ub-madoc.bib.uni-mannheim.de/41831
URN: urn:nbn:de:bsz:180-madoc-418315
Document Type: Working paper
Year of publication: 2016
The title of a journal, publication series: Mannheimer Manuskripte zu Risikotheorie, Portfolio Management und Versicherungswirtschaft
Volume: 186
Place of publication: Mannheim
Edition: Version 2016
Publication language: English
Institution: Business School > ABWL, Risikotheorie, Portfolio Management u. Versicherungswissenschaft (Albrecht)
Außerfakultäre Einrichtungen > Institut für Versicherungswissenschaft
MADOC publication series: Lehrstuhl für ABWL, Risikotheorie, Portfolio Management und Versicherungswirtschaft (Albrecht) > Mannheimer Manuskripte zu Risikotheorie, Portfolio Management und Versicherungswirtschaft
Subject: 330 Economics
Abstract: We analyze hedging strategies that minimize tail risk measured by Value-at-Risk (VaR) or Conditional-Value-at-Risk (CVaR). In particular, we derive first-order conditions characterizing VaR- and CVaR-minimal hedging with futures in regime-switching models. Using cross-hedging examples, we theoretically and empirically demonstrate that tail-risk-minimal strategies can noticeably deviate from standard minimum-variance policies in the presence of crash regimes. In such examples, VaR- and CVaR-minimal strategies based on regime-switching models are able to attain additional tail risk reductions, which can be confirmed by nonparametric and extreme-value-theory-based meth- ods. These results imply that the proposed methodology for tail risk management can cut losses during financial crises and reduce capital requirements for institutional investors.

Dieser Eintrag ist Teil der Universitätsbibliographie.

Das Dokument wird vom Publikationsserver der Universitätsbibliothek Mannheim bereitgestellt.

Available versions of this item




+ Citation Example and Export

Huggenberger, Markus ; Albrecht, Peter ; Pekelis, Alexandr (2016) Tail risk hedging and regime switching. Open Access Mannheimer Manuskripte zu Risikotheorie, Portfolio Management und Versicherungswirtschaft Mannheim 186 [Working paper]
[img]


+ Search Authors in

+ Download Statistics

Downloads per month over past year

View more statistics



You have found an error? Please let us know about your desired correction here: E-Mail


Actions (login required)

Show item Show item