This study explored the effects of ambiguity on the calculation of Value-at-Risk (VaR) using a mathematical model based on the theory of Choquet-Brownian processes. It was found that while a moderate degree of ambiguity aversion yields a higher value for VaR and Expected Shortfall (ES), the result can be reversed in a deeply ambiguous environment. Additionally, some sufficient conditions are provided for the preservation of this effect under various forms of risk aggregation. This study offers a new perspective to full awareness on capital requirement calculation as requested by international regulation.
Rossella Agliardi (2018). Value-at-risk under ambiguity aversion. FINANCIAL INNOVATION, 4, 1-13 [10.1186/s40854-018-0095-z].
Value-at-risk under ambiguity aversion
Rossella Agliardi
2018
Abstract
This study explored the effects of ambiguity on the calculation of Value-at-Risk (VaR) using a mathematical model based on the theory of Choquet-Brownian processes. It was found that while a moderate degree of ambiguity aversion yields a higher value for VaR and Expected Shortfall (ES), the result can be reversed in a deeply ambiguous environment. Additionally, some sufficient conditions are provided for the preservation of this effect under various forms of risk aggregation. This study offers a new perspective to full awareness on capital requirement calculation as requested by international regulation.File | Dimensione | Formato | |
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