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arXiv · cond-mat/0205636

Hedging Extreme Co-Movements

Y. Malevergne·D. Sornette
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Abstract

Based on a recent theorem due to the authors, it is shown how the extreme tail dependence between an asset and a factor or index or between two assets can be easily calibrated. Portfolios constructed with stocks with minimal tail dependence with the market exhibit a remarkable degree of decorrelation with the market at no cost in terms of performance measured by the Sharpe ratio.

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Y. Malevergne, D. Sornette. 2002-05-30. Hedging Extreme Co-Movements. https://arxiv.org/abs/cond-mat/0205636

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