AdjustedVarianceCovarianceES function

Cornish-Fisher adjusted Variance-Covariance ES

Function estimates the Variance-Covariance ES of a multi-asset portfolio using the Cornish - Fisher adjustment for portfolio return non-normality, for specified confidence level and holding period.

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

Arguments

• vc.matrix: Variance covariance matrix for returns
• mu: Vector of expected position returns
• skew: Return skew
• kurtosis: Return kurtosis
• positions: Vector of positions
• cl: Confidence level and is scalar
• hp: Holding period and is scalar

Examples

# Variance-covariance ES 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
   AdjustedVarianceCovarianceES(vc.matrix, mu, skew, kurtosis, positions, cl, hp)

Author(s)

Dinesh Acharya

References

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