T <scp>ail</scp> -GAN: Learning to Simulate Tail Risk Scenarios

The estimation of loss distributions for dynamic portfolios requires the simulation of scenarios representing realistic joint dynamics of their components. We propose a novel data-driven approach for simulating realistic, high-dimensional multiasset scenarios, focusing on accurately representing tail risk for a class of static and dynamic trading strategies. We exploit the joint elicitability property of Value-at-Risk and Expected Shortfall to design a Generative Adversarial Network that learns to simulate price scenarios preserving these tail risk features. We demonstrate the performance of our algorithm on synthetic and market data sets through detailed numerical experiments. In contrast to previously proposed data-driven scenario generators, our proposed method correctly captures tail risk for a broad class of trading strategies and demonstrates strong generalization capabilities. In addition, combining our method with principal component analysis of the input data enhances its scalability to large-dimensional multiasset time series, setting our framework apart from the univariate settings commonly considered in the literature. This paper was accepted by Kay Giesecke, finance. Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mnsc.2023.00936 .

• 저널Management Science · 72(4) · 2917–2936
• 토픽Risk and Portfolio Optimization · Management Science and Operations Research
• DOI10.1287/mnsc.2023.00936
• 저자Rama Cont, Mihai Cucuringu, Renyuan Xu, Chao Zhang