Related papers: Suitability of Capital Allocations for Performance…
In this paper we develop a novel methodology for estimation of risk capital allocation. The methodology is rooted in the theory of risk measures. We work within a general, but tractable class of law-invariant coherent risk measures, with a…
Systemic risk measures aggregate the risks from multiple financial institutions to find system-wide capital requirements. Though much attention has been given to assessing the level of systemic risk, less has been given to allocating that…
Risk measures for random vectors have been considered in multi-asset markets with transaction costs and financial networks in the literature. While the theory of set-valued risk measures provide an axiomatic framework for assigning to a…
We study capital requirements for bounded financial positions defined as the minimum amount of capital to invest in a chosen eligible asset targeting a pre-specified acceptability test. We allow for general acceptance sets and general…
The paper discusses capital allocation using the Euler formula and focuses on the risk measures Value-at-Risk (VaR) and Expected shortfall (ES). Some new results connected to this capital allocation is known. Two examples illustrate that…
In this paper, we study capital allocation for dynamic risk measures, with an axiomatic approach but also by exploiting the relation between risk measures and BSDEs. Although there is a wide literature on capital allocation rules in a…
The minimization of some multivariate risk indicators may be used as an allocation method, as proposed in C\'enac et al. [6]. The aim of capital allocation is to choose a point in a simplex, according to a given criterion. In a previous…
This article proposes a new class of risk-sharing rules by exploring the relationship between capital allocation and risk sharing. While the former is concerned with ex-ante allocating capitals to different lines of business within a…
Systemic risk refers to the risk that the financial system is susceptible to failures due to the characteristics of the system itself. The tremendous cost of systemic risk requires the design and implementation of tools for the efficient…
The financial crisis has dramatically demonstrated that the traditional approach to apply univariate monetary risk measures to single institutions does not capture sufficiently the perilous systemic risk that is generated by the…
In a capital adequacy framework, risk measures are used to determine the minimal amount of capital that a financial institution has to raise and invest in a portfolio of pre-specified eligible assets in order to pass a given capital…
This paper addresses allocation methodologies for a risk measure inherited from ruin theory. Specifically, we consider a dynamic value-at-risk (VaR) measure defined as the smallest initial capital needed to ensure that the ultimate ruin…
In the context of risk measures, the capital allocation problem is widely studied in the literature where different approaches have been developed, also in connection with cooperative game theory and systemic risk. Although static capital…
The theory of acceptance sets and their associated risk measures plays a key role in the design of capital adequacy tests. The objective of this paper is to investigate, in the context of bounded financial positions, the class of…
This paper investigates performance attribution measures as a basis for constraining portfolio optimization. We employ optimizations that minimize expected tail loss and investigate both asset allocation (AA) and the selection effect (SE)…
Despite the fact that the Euler allocation principle has been adopted by many financial institutions for their internal capital allocation process, a comprehensive description of Euler allocation seems still to be missing. We try to fill…
This paper develops an axiomatic framework for ranking metrics, a general class of functionals for evaluating and ordering financial or insurance positions. Unlike traditional risk-adjusted performance measures-such as the Sharpe ratio,…
The problem of identifying to which of a given set of classes objects belong is ubiquitous, occurring in many research domains and application areas, including medical diagnosis, financial decision making, online commerce, and national…
The financial crisis showed the importance of measuring, allocating and regulating systemic risk. Recently, the systemic risk measures that can be decomposed into an aggregation function and a scalar measure of risk, received a lot of…
Several performance measures can be used for evaluating classification results: accuracy, F-measure, and many others. Can we say that some of them are better than others, or, ideally, choose one measure that is best in all situations? To…