Related papers: Measuring risk with multiple eligible assets
We study the sensitivity to estimation error of portfolios optimized under various risk measures, including variance, absolute deviation, expected shortfall and maximal loss. We introduce a measure of portfolio sensitivity and test the…
This paper investigates risk measures derived from the expected maximum deficit in a continuous-time framework and develops optimal reserve allocation strategies across multiple lines of business. We formalize the expected maximum deficit…
This paper focuses on a dynamic multi-asset mean-variance portfolio selection problem under model uncertainty. We develop a continuous time framework for taking into account ambiguity aversion about both expected return rates and…
Regulatory and contractual constraints on individual exposures are standard in insurance and reinsurance markets, but a poorly designed constraint can distort the economic incentives of risk-averse agents. In the unconstrained problem, the…
Systemic risk is the risk that a company- or industry-level risk could trigger a huge collapse of another or even the whole institution. Various systemic risk measures have been proposed in the literature to quantify the domino and…
Accepting a proposition means that our confidence in this proposition is strictly greater than the confidence in its negation. This paper investigates the subclass of uncertainty measures, expressing confidence, that capture the idea of…
In this paper, we present a unified framework for decision making under uncertainty. Our framework is based on the composite of two risk measures, where the inner risk measure accounts for the risk of decision given the exact distribution…
This paper introduces marginal fairness, a new individual fairness notion for equitable decision-making in the presence of protected attributes such as gender, race, and religion. This criterion ensures that decisions based on generalized…
This paper characterizes the equilibrium in a continuous time financial market populated by heterogeneous agents who differ in their rate of relative risk aversion and face convex portfolio constraints. The model is studied in an…
To achieve robustness of risk across different assets, risk parity investing rules, a particular state of risk contributions, have grown in popularity over the previous few decades. To generalize the concept of risk contribution from the…
We address the statistical estimation of composite functionals which may be nonlinear in the probability measure. Our study is motivated by the need to estimate coherent measures of risk, which become increasingly popular in finance,…
This study develops and analyzes an optimization model of smart contract adoption under bounded risk, linking structural theory with simulation and real-world validation. We examine how adoption intensity alpha is structurally pinned at a…
We develop and analyze $M$-estimation methods for divergence functionals and the likelihood ratios of two probability distributions. Our method is based on a non-asymptotic variational characterization of $f$-divergences, which allows the…
This paper studies the continuous time mean-variance portfolio selection problem with one kind of non-linear wealth dynamics. To deal the expectation constraint, an auxiliary stochastic control problem is firstly solved by two new…
Common asset holdings are widely believed to have been the primary vector of contagion in the recent financial crisis. We develop a network approach to the amplification of financial contagion due to the combination of overlapping…
We propose a definition of diversification as a binary relationship between financial portfolios. According to it, a convex linear combination of several risk positions with some weights is considered to be less risky than the probabilistic…
In the literature on risk measures, cash subadditivity was proposed to replace cash additivity, motivated by the presence of stochastic or ambiguous interest rates and defaultable contingent claims. Cash subadditivity has been traditionally…
Systemic risk is concerned with the instability of a financial system whose members are interdependent in the sense that the failure of a few institutions may trigger a chain of defaults throughout the system. Recently, several systemic…
Conditional forecasts of risk measures play an important role in internal risk management of financial institutions as well as in regulatory capital calculations. In order to assess forecasting performance of a risk measurement procedure,…
Credit ratings are widely used by investors as a screening device. We introduce and study several natural notions of risk consistency that promote prudent investment decisions in the framework of Choquet rating criteria. Three closely…