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Convolutions of heavy-tailed random variables and applications to portfolio diversification and MA(1) time series
Published online by Cambridge University Press: 01 July 2016
Abstract
Suppose X1,X2 are independent random variables satisfying a second-order regular variation condition on the tail-sum and a balance condition on the tails. In this paper we give a description of the asymptotic behaviour as t → ∞ for P(X1 + X2 > t). The result is applied to the problem of risk diversification in portfolio analysis and to the estimation of the parameter in a MA(1) model.
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- General Applied Probability
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- Copyright © Applied Probability Trust 2000
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