Asymptotic Dynamics and Value-at-Risk of Large Diversified Portfolios in a Jump-Diffusion Market
This paper studies the modelling of large diversified portfolios in a financial market with jump-diffusion risks. The portfolios considered include three categories: equal money-weighted portfolios, risk-minimizing portfolios and market indices. Reduced-form dynamics driven jointly by one Brownian m...
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sg-smu-ink.lkcsb_research-36292016-03-04T15:41:33Z Asymptotic Dynamics and Value-at-Risk of Large Diversified Portfolios in a Jump-Diffusion Market LIM, Kian Guan LIU, Xiaoqing TSUI, Kai Chong This paper studies the modelling of large diversified portfolios in a financial market with jump-diffusion risks. The portfolios considered include three categories: equal money-weighted portfolios, risk-minimizing portfolios and market indices. Reduced-form dynamics driven jointly by one Brownian motion and one Poisson process are derived for the asymptotics of such portfolios. We prove that derivatives written on a portfolio can be priced by treating the asymptotic dynamics as the underlying process if the number of assets in the portfolio is sufficiently large. Analytical and Monte Carlo value-at-risk can be computed for the portfolios based on their asymptotic dynamics. 2004-01-01T08:00:00Z text https://ink.library.smu.edu.sg/lkcsb_research/2630 info:doi/10.1088/1469-7688/4/2/002 https://doi.org/10.1088/1469-7688/4/2/002 Research Collection Lee Kong Chian School Of Business eng Institutional Knowledge at Singapore Management University Finance and Financial Management Portfolio and Security Analysis |
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Finance and Financial Management Portfolio and Security Analysis LIM, Kian Guan LIU, Xiaoqing TSUI, Kai Chong Asymptotic Dynamics and Value-at-Risk of Large Diversified Portfolios in a Jump-Diffusion Market |
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This paper studies the modelling of large diversified portfolios in a financial market with jump-diffusion risks. The portfolios considered include three categories: equal money-weighted portfolios, risk-minimizing portfolios and market indices. Reduced-form dynamics driven jointly by one Brownian motion and one Poisson process are derived for the asymptotics of such portfolios. We prove that derivatives written on a portfolio can be priced by treating the asymptotic dynamics as the underlying process if the number of assets in the portfolio is sufficiently large. Analytical and Monte Carlo value-at-risk can be computed for the portfolios based on their asymptotic dynamics. |
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text |
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LIM, Kian Guan LIU, Xiaoqing TSUI, Kai Chong |
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LIM, Kian Guan LIU, Xiaoqing TSUI, Kai Chong |
author_sort |
LIM, Kian Guan |
title |
Asymptotic Dynamics and Value-at-Risk of Large Diversified Portfolios in a Jump-Diffusion Market |
title_short |
Asymptotic Dynamics and Value-at-Risk of Large Diversified Portfolios in a Jump-Diffusion Market |
title_full |
Asymptotic Dynamics and Value-at-Risk of Large Diversified Portfolios in a Jump-Diffusion Market |
title_fullStr |
Asymptotic Dynamics and Value-at-Risk of Large Diversified Portfolios in a Jump-Diffusion Market |
title_full_unstemmed |
Asymptotic Dynamics and Value-at-Risk of Large Diversified Portfolios in a Jump-Diffusion Market |
title_sort |
asymptotic dynamics and value-at-risk of large diversified portfolios in a jump-diffusion market |
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Institutional Knowledge at Singapore Management University |
publishDate |
2004 |
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https://ink.library.smu.edu.sg/lkcsb_research/2630 https://doi.org/10.1088/1469-7688/4/2/002 |
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1770570494877106176 |