On representing claims for coherent risk measures
Abstract
We consider the problem of representing claims for coherent risk measures. For this purpose we introduce the concept of (weak and strong) time-consistency with respect to a portfolio of assets, generalizing the one defined by Delbaen. In a similar way we extend the notion of m-stability, by introducing weak and strong versions. We then prove that the two concepts of m-stability and time-consistency are still equivalent, thus giving necessary and sufficient conditions for a coherent risk measure to be represented by a market with proportional transaction costs. We go on to deduce that, under a separability assumption, any coherent risk measure is strongly time-consistent with respect to a suitably chosen countable portfolio, and show the converse: that any market with proportional transaction costs is equivalent to a market priced by a coherent risk measure, essentially establishing the equivalence of the two concepts.
Keywords
Cite
@article{arxiv.0708.0512,
title = {On representing claims for coherent risk measures},
author = {Saul Jacka and Abdelkarem Berkaoui},
journal= {arXiv preprint arXiv:0708.0512},
year = {2007}
}
Comments
47 pages