Asset Allocation Using Extreme Value Theory

Younes Bensalah
This paper examines asset allocation strategies in an extreme value at risk (VaR) framework in which the risk measure is the p-quantile from the extreme value distribution. The main focus is on the allocation problem faced by an extremely risk-averse institution, such as a central bank. The optimal portfolio in terms of excess return over the risk-free rate per unit of risk is also described. An example of asset allocation is presented using a 1-year...
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