Search article 19.01.2018 18:07

Vol. 24(4) , October 2017

The theory and application of spectral risk measures in Vietnam
Ho Hong Hai & Nguyen Thi Hoa
KeywordsRisk measure Investment portfolio Value-at-Risk Expected shortfall Spectral risk measures Distortion theory
AbstractThis paper aims to provide a new risk measure for portfolio management in Vietnam by incorporating investor’s risk aversion into current risk measures such as value at risk (VaR) and expected shortfall (ES). This measure shares several desirable characteristics with the coherent risk measures, as illustrated in Artzner et al. (1997). In Vietnam, our study makes the first attempt to utilize distortion theory, instead of utility theory, to facilitate the adoption of risk aversion level in the popular risk measures. We find that spectral risk measure is more flexible and effective to different groups of risk-adverse investors, compared to the more monotonic and conventional VaR and ES measures