Subadditivity re–examined: the case for value-at-risk
Danielsson, J.
, Jorgensen, B. N., Mandira, S., Samorodnitsky, G. & Vries, C. G. d.
(2005).
Subadditivity re–examined: the case for value-at-risk.
(Financial Markets Group Discussion Papers 549).
Financial Markets Group, The London School of Economics and Political Science.
, Jorgensen, B. N., Mandira, S., Samorodnitsky, G. & Vries, C. G. d.
(2005).
Subadditivity re–examined: the case for value-at-risk.
(Financial Markets Group Discussion Papers 549).
Financial Markets Group, The London School of Economics and Political Science.
This paper explores the potential for violations of VaR subadditivity both theoretically and by simulations, and finds that for most practical applications VaR is subadditive. Hence, there is no reason to choose a more complicated risk measure than VaR, solely for reasons of coherence.