Subscribe to the gold package and get unlimited access to Shamra Academy
Register a new userAn axiomatization of $Lambda$-quantiles
186
0
0.0
(
0
)
Ask ChatGPT about the research
No Arabic abstract
We give an axiomatic foundation to $Lambda$-quantiles, a family of generalized quantiles introduced by Frittelli et al. (2014) under the name of Lambda Value at Risk. Under mild assumptions, we show that these functionals are characterized by a property that we call locality, that means that any change in the distribution of the probability mass that arises entirely above or below the value of the $Lambda$-quantile does not modify its value. We compare with a related axiomatization of the usual quantiles given by Chambers (2009), based on the stronger property of ordinal covariance, that means that quantiles are covariant with respect to increasing transformations. Further, we present a systematic treatment of the properties of $Lambda$-quantiles, refining some of the results of Frittelli et al. (2014) and Burzoni et al. (2017) and showing that in the case of a nonincreasing $Lambda$ the properties of $Lambda$-quantiles closely resemble those of the usual quantiles.
rate research
Read More
Risk contributions of portfolios form an indispensable part of risk adjusted performance measurement. The risk contribution of a portfolio, e.g., in the Euler or Aumann-Shapley framework, is given by the partial derivatives of a risk measure applied to the portfolio return in direction of the asset weights. For risk measures that are not positively homogeneous of degree 1, however, known capital allocation principles do not apply. We study the class of lambda quantile risk measures, that includes the well-known Value-at-Risk as a special case, but for which no known allocation rule is applicable. We prove differentiability and derive explicit formulae of the derivatives of lambda quantiles with respect to their portfolio composition, that is their risk contribution. For this purpose, we define lambda quantiles on the space of portfolio compositions and consider generic (also non-linear) portfolio operators. We further derive the Euler decomposition of lambda quantiles for generic portfolios and show that lambda quantiles are homogeneous in the space of portfolio compositions, with a homogeneity degree that depends on the portfolio composition and the lambda function. This result is in stark contrast to the positive homogeneity properties of risk measures defined on the space of random variables which admit a constant homogeneity degree. We introduce a generalised version of Euler contributions and Euler allocation rule, which are compatible with risk measures of any homogeneity degree and non-linear portfolios. We further provide financial interpretations of the homogeneity degree of lambda quantiles and introduce the notion of event-specific homogeneity of portfolio operators.
In multivariate extreme value theory (MEVT), the focus is on analysis outside of the observable sampling zone, which implies that the region of interest is associated to high risk levels. This work provides tools to include directional notions into the MEVT, giving the opportunity to characterize the recently introduced directional multivariate quantiles (DMQ) at high levels. Then, an out-sample estimation method for these quantiles is given. A bootstrap procedure carries out the estimation of the tuning parameter in this multivariate framework and helps with the estimation of the DMQ. Asymptotic normality for the proposed estimator is provided and the methodology is illustrated with simulated data-sets. Finally, a real-life application to a financial case is also performed.
Consider the empirical measure, $hat{mathbb{P}}_N$, associated to $N$ i.i.d. samples of a given probability distribution $mathbb{P}$ on the unit interval. For fixed $mathbb{P}$ the Wasserstein distance between $hat{mathbb{P}}_N$ and $mathbb{P}$ is a random variable on the sample space $[0,1]^N$. Our main result is that its normalised quantiles are asymptotically maximised when $mathbb{P}$ is a convex combination between the uniform distribution supported on the two points ${0,1}$ and the uniform distribution on the unit interval $[0,1]$. This allows us to obtain explicit asymptotic confidence regions for the underlying measure $mathbb{P}$. We also suggest extensions to higher dimensions with numerical evidence.
Randomization (a.k.a. permutation) inference is typically interpreted as testing Fishers sharp null hypothesis that all effects are exactly zero. This hypothesis is often criticized as uninteresting and implausible. We show, however, that many randomization tests are also valid for a bounded null hypothesis under which effects are all negative (or positive) for all units but otherwise heterogeneous. The bounded null is closely related to important concepts such as monotonicity and Pareto efficiency. Inverting tests of this hypothesis yields confidence intervals for the maximum (or minimum) individual treatment effect. We then extend randomization tests to infer other quantiles of individual effects, which can be used to infer the proportion of units with effects larger (or smaller) than any threshold. The proposed confidence intervals for all quantiles of individual effects are simultaneously valid, in the sense that no correction due to multiple analyses is needed. In sum, we provide a broader justification for Fisher randomization tests, and develop exact nonparametric inference for quantiles of heterogeneous individual effects. We illustrate our methods with simulations and applications, where we find that Stephenson rank statistics often provide the most informative results.
We test three common information criteria (IC) for selecting the order of a Hawkes process with an intensity kernel that can be expressed as a mixture of exponential terms. These processes find application in high-frequency financial data modelling. The information criteria are Akaikes information criterion (AIC), the Bayesian information criterion (BIC) and the Hannan-Quinn criterion (HQ). Since we work with simulated data, we are able to measure the performance of model selection by the success rate of the IC in selecting the model that was used to generate the data. In particular, we are interested in the relation between correct model selection and underlying sample size. The analysis includes realistic sample sizes and parameter sets from recent literature where parameters were estimated using empirical financial intra-day data. We compare our results to theoretical predictions and similar empirical findings on the asymptotic distribution of model selection for consistent and inconsistent IC.
Log in to be able to interact and post comments
comments
Fetching comments
Sign in to be able to follow your search criteria
