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Citation Information : Statistics in Transition New Series. Volume 17, Issue 2, Pages 305-316, DOI: https://doi.org/10.21307/stattrans-2016-021
License : (CC BY 4.0)
Published Online: 06-July-2017
Investing in the economic world, characterized by a high level of uncertainty and volatility, entails a higher level of risk related to investment. One of the most commonly used risk measure is Value-at-Risk. However, despite the ease of calculation and interpretation, this measure suffers from a significant drawback – it is not subadditive. This property is the key issue in terms of portfolio diversification. Another risk measure, which meets this assumption, has been proposed – Conditional Value-at-Risk, defined as a conditional loss beyond Value-at-Risk. However, the choice of a risk measure is an individual decision of an investor and it is directly related to his attitudes to risk. In this paper the new risk measure is proposed – the GlueVaR risk measure, which can be defined as a linear combination of VaR and GlueVaR. It allows for calculating the level of investment loss depending on investment’s attitudes to risk. Moreover, GlueVaR meets the subadditivity property, therefore it may be used in portfolio risk assessment. The application of the GlueVaR risk measure is presented for the non-ferrous metals market.