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A New Coherent Multivariate Average-Value-at-Risk

Kerem Ugurlu(keremugurlu***at***gmail.com)

Abstract: A new multivariate performance measure Average-Value-at-Risk, mAVaR αevaluating the sum of N risky assets composing the portfolio of an investor with respect to riskN-dimensional risk level vectorαis proposed. We show that the proposed operator satisfies the four axioms of a coherent risk measure, while reducing to the one variableAverage-Value-at-RiskAVaR, in caseN= 1. In that respect, mAVaRα is the natural extension of AVaR to N dimensional case, while maintaining its axiomatic properties.mAVaRαis flexible by giving the investor the choice of choosing the risk level α i of each risky asset differently.

Keywords: Multivariate Coherent Risk Measures, Risk Management,Average-Value-at-Risk

Category 1: Applications -- OR and Management Sciences

Citation:

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Entry Submitted: 04/24/2020
Entry Accepted: 04/25/2020
Entry Last Modified: 04/24/2020

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