Financial risk measures for a network of individual agents holding portfolios of lighttailed objects
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Date
2019
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Abstract
We investigate a financial network of agents holding portfolios of independent
light-tailed risky objects whose losses are asymptotically exponentially
distributed with distinct tail parameters. We show that the
asymptotic distributions of portfolio losses belong to the class of functional
exponential mixtures which we introduce in this paper. We also
provide statements for Value-at-Risk and Expected Shortfall risk measures
as well as for their conditional counterparts. Compared to heavy
tail settings we establish important qualitative differences in the asymptotic
behavior of portfolio risks under a light tail assumption which have
to be accounted for in practical risk management.
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Keywords
asymptotic exponential distribution, value-at-risk, risk management, financial network, expected shortfall