Journal of Economic Development
Vol. 24(4) , October 2017, Page 29-45


The theory and application of spectral risk measures in Vietnam
Ho Hong Hai & Nguyen Thi Hoa

DOI: 10.24311/jed/2017.24.4.2
Abstract
This 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

Keywords
Risk measure Investment portfolio Value-at-Risk Expected shortfall Spectral risk measures Distortion theory
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