A duality approach to the worst case value at risk for a sum of dependent random variables with known covariances

Details A duality approach to the worst case value at risk for a sum of dependent random variables with known covariances A duality approach to the worst case value at risk for a sum of dependent random variables with known covariances

2009-12-09

arxiv.org/abs/0912.1841v1

Economy

Quantitative Finance

Risk Management

13 pages

Scientific paper

We propose an approach to the aggregation of risks which is based on estimation of simple quantities (such as covariances) associated to a vector of dependent random variables, and which avoids the use of parametric families of copulae. Our main result demonstrates that the method leads to bounds on the worst case Value at Risk for a sum of dependent random variables. Its proof applies duality theory for infinite dimensional linear programs.

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