Show simple item record

dc.contributor.authorIbragimov, Rustam
dc.contributor.authorWalden, Johan
dc.date.accessioned2009-02-20T08:31:51Z
dc.date.issued2007
dc.identifier.citationIbragimov, Rustam and Johan Walden. 2007. The limits of diversification when losses may be large. Journal of Banking and Finance 31(8): 2551-2569.en
dc.identifier.issn0378-4266en
dc.identifier.urihttp://nrs.harvard.edu/urn-3:HUL.InstRepos:2624460
dc.description.abstractRecent results in value at risk analysis show that, for extremely heavy-tailed risks with unbounded distribution support, diversification may increase value at risk, and that generally it is difficult to construct an appropriate risk measure for such distributions. We further analyze the limitations of diversification for heavy-tailed risks. We provide additional insight in two ways. First, we show that similar non-diversification results are valid for a large class of risks with bounded support, as long as the risks are concentrated on a sufficiently large interval. The required length of the support depends on the number of risks available and on the degree of heavy-tailedness. Second, we relate the value at risk approach to more general risk frameworks. We argue that in markets for risky assets where the number of assets is limited compared with the (bounded) distribution support of the risks, unbounded heavy-tailed risks may provide a reasonable approximation. We suggest that this type of analysis may have a role in explaining various types of market failures in markets for assets with possibly large negative outcomes.en
dc.description.sponsorshipEconomicsen
dc.language.isoen_USen
dc.publisherElsevieren
dc.relation.isversionofhttp://dx.doi.org/10.1016/j.jbankfin.2006.11.014en
dash.licenseLAA
dc.titleThe limits of diversification when losses may be large.en
dc.relation.journalJournal of Banking and Financeen
dash.depositing.authorIbragimov, Rustam
dc.identifier.doi10.1016/j.jbankfin.2006.11.014*
dash.contributor.affiliatedIbragimov, Rustam


Files in this item

Thumbnail

This item appears in the following Collection(s)

Show simple item record