https://phaidrabg.bg.ac.rs/o:28253 doi:10.3390/e22121425 ISSN: 1099-4300 Božović, Miloš Entropy 22(12) 2020 eng application/pdf 1291124 bytes Portfolio tail risk : a multivariate extreme value theory approach info:eu-repo/semantics/article Keywords: tail risk; extreme value theory; principal component analysis; value at risk; expected shortfall http://creativecommons.org/licenses/by/4.0/legalcode Abstract: This paper develops a method for assessing portfolio tail risk based on extreme value theory. The technique applies separate estimations of univariate series and allows for closed-form expressions for Value at Risk and Expected Shortfall. Its forecasting ability is tested on a portfolio of U.S. stocks. The in-sample goodness-of-fit tests indicate that the proposed approach is better suited for portfolio risk modeling under extreme market movements than comparable multivariate parametric methods. Backtesting across multiple quantiles demonstrates that the model cannot be rejected at any reasonable level of significance, even when periods of stress are included. Numerical simulations corroborate the empirical results.