Cornish-Fisher adjusted variance-covariance VaR

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Description

Estimates the variance-covariance VaR of a multi-asset portfolio using the Cornish-Fisher adjustment for portfolio-return non-normality, for specified confidence level and holding period.

Usage

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AdjustedVarianceCovarianceVaR(vc.matrix, mu, skew, kurtosis, positions, cl, hp)

Arguments

vc.matrix

Assumed variance covariance matrix for returns

mu

Vector of expected position returns

skew

Portfolio return skewness

kurtosis

Portfolio return kurtosis

positions

Vector of positions

cl

Confidence level and is scalar or vector

hp

Holding period and is scalar or vector

Author(s)

Dinesh Acharya

References

Dowd, K. Measuring Market Risk, Wiley, 2007.

Examples

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# Variance-covariance for randomly generated portfolio
   vc.matrix <- matrix(rnorm(16),4,4)
   mu <- rnorm(4)
   skew <- .5
   kurtosis <- 1.2
   positions <- c(5,2,6,10)
   cl <- .95
   hp <- 280
   AdjustedVarianceCovarianceVaR(vc.matrix, mu, skew, kurtosis, positions, cl, hp)

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