Parametric stress-testing in non-normal markets via entropy pooling
Author(s)
Meucci, Attilio
Date issued
2015
In
Risk Magazine
No
June
From page
1
To page
5
Reviewed by peer
1
Subjects
Entropy Pooling Kullback-Leibler copula-marginal stress-test risk
Abstract
A novel approach for stress-testing (portfolios of) financial assets is presented. The technique extends the parametric Entropy Pooling approach to skewed and thick-tailed markets. The technique rests on a copula-marginal decomposition for the entropy together with several approximation schemes which renders the numerical computations feasible for real-life problems. An illustration with a portfolio of European options is presented.
Later version
http://www.risk.net/risk-magazine/technical-paper/2410967/stress-testing-in-non-normal-markets-via-entropy-pooling
Publication type
journal article
File(s)