Generalized Marginal Risk

Keel, Simon and Ardia, David (2009): Generalized Marginal Risk.

Abstract

An important aspect of portfolio risk management is the analysis of the overall risk with respect to the assets' allocations. Marginal risk is the traditional tool, however, this metric is only meaningful when a position is levered or when the proceeds from the sale of a position are put in the cash account. This paper proposes an extension of the traditional marginal risk approach as a means of overcoming this defficiency. The new concept addresses situations where the change in a position results in changes to other positions as well. An illustration is provided for synthetic and real-world portfolios.

• Item Type: MPRA Paper
• Language: English
• Keywords: Marginal risk; component risk; generalized marginal risk; Value-at-Risk; expected shortfall; elliptical distribution
• Subjects: G - Financial Economics > G1 - General Financial Markets > G11 - Portfolio Choice ; Investment Decisions; C - Mathematical and Quantitative Methods > C4 - Econometric and Statistical Methods: Special Topics > C44 - Operations Research ; Statistical Decision Theory; G - Financial Economics > G1 - General Financial Markets > G10 - General

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