TITLE:
New Class of Distortion Risk Measures and Their Tail Asymptotics with Emphasis on VaR
AUTHORS:
Chuancun Yin, Dan Zhu
KEYWORDS:
Coherent Risk Measure, Copula, Distortion Risk Measure, Extreme Value Theory, GlueVaR, Tail Subadditivity, Tail Distortion Risk Measure
JOURNAL NAME:
Journal of Financial Risk Management,
Vol.7 No.1,
March
6,
2018
ABSTRACT: Distortion risk measures
are extensively used in finance and insurance applications because of their
appealing properties. We present three methods to construct new class of
distortion functions and measures. The approach involves the composting
methods, the mixing methods and the approach that based on the theory of
copula. We also investigate the tail subadditivity for VaR and other distortion
risk measures. In particular, we demonstrate that VaR is tail subadditive for
the case where the support of risk is bounded. Various examples are also
presented to illustrate the results.