RT Journal Article
SR Electronic
T1 The StressVaR: A New Risk Concept for Extreme
Risk and Fund Allocation
JF The Journal of Alternative Investments
FD Institutional Investor Journals
SP 10
OP 23
DO 10.3905/jai.2011.13.3.010
VO 13
IS 3
A1 Cyril Coste
A1 Raphaël Douady
A1 Ilija I. Zovko
YR 2010
UL https://pm-research.com/content/13/3/10.abstract
AB In this article the authors introduce an approach to risk estimation based on nonlinear factor–models—the “StressVaR” (SVaR). Developed to evaluate the risk of hedge funds, the SVaR appears to be applicable to a wide range of investments. The computation of the StressVaR is a three-step procedure whose main component is to use the fairly short and sparse history of the hedge fund returns to identify relevant risk factors among a very broad set of possible risk sources. This risk profile is obtained by calibrating a polymodel, which is a collection of nonlinear single-factor models, as opposed to a single multi-factor model. The authors then use the risk profile and the very long and rich history of the factors to assess the possible impact of known past crises on the funds, unveiling their hidden risks and so called “black swans.”TOPICS: Real assets/alternative investments/private equity, VAR and use of alternative risk measures of trading risk, statistical methods, financial crises and financial market history