Related papers: A risk management approach to capital allocation
Robust optimisation is a well-established framework for optimising functions in the presence of uncertainty. The inherent goal of this problem is to identify a collection of inputs whose outputs are both desirable for the decision maker,…
This paper introduces and studies factor risk measures. While risk measures only rely on the distribution of a loss random variable, in many cases risk needs to be measured relative to some major factors. In this paper, we introduce a…
Risk measures for multivariate financial positions are studied in a utility-based framework. Under a certain incomplete preference relation, shortfall and divergence risk measures are defined as the optimal values of specific set…
This article develops the theory of risk budgeting portfolios, when we would like to impose weight constraints. It appears that the mathematical problem is more complex than the traditional risk budgeting problem. The formulation of the…
Risk management is very important for individual investors or companies. There are many ways to measure the risk of investment. Prices of risky assets vary rapidly and randomly due to the complexity of finance market. Random interval is a…
Any optimization algorithm based on the risk parity approach requires the formulation of portfolio total risk in terms of marginal contributions. In this paper we use the independence of the underlying factors in the market to derive the…
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,…
This paper presents a new copula to model dependencies between insurance entities, by considering how insurance entities are affected by both macro and micro factors. The model used to build the copula assumes that the insurance losses of…
A new notion of stochastic ordering is introduced to compare multivariate stochastic risk models with respect to extreme portfolio losses. In the framework of multivariate regular variation comparison criteria are derived in terms of…
The aims of this study are twofold. First, we consider an optimal risk allocation problem with non-convex preferences. By establishing an infimal representation for distortion risk measures, we give some necessary and sufficient conditions…
Attempts to allocate capital across a selection of different investments are often hampered by the fact that investors' decisions are made under limited information (no historical return data) and during an extremely limited timeframe.…
Risk diversification is the basis of insurance and investment. It is thus crucial to study the effects that could limit it. One of them is the existence of systemic risk that affects all the policies at the same time. We introduce here a…
The robust Poisson method is becoming increasingly popular when estimating the association of exposures with a binary outcome. Unlike the logistic regression model, the robust Poisson method yields results that can be interpreted as risk or…
Multi-criteria decision support systems are used in various fields of human activities. In every alternative multi-criteria decision making problem can be represented by a set of properties or constraints. The properties can be qualitative…
Modern portfolio theory has provided for decades the main framework for optimizing portfolios. Because of its sensitivity to small changes in input parameters, especially expected returns, the mean-variance framework proposed by Markowitz…
This paper introduces new valuation schemes called actuarial-consistent valuations for insurance liabilities which depend on both financial and actuarial risks, which imposes that all actuarial risks are priced via standard actuarial…
We develop a new classification framework based on the theory of coherent risk measures and systemic risk. The proposed approach is suitable for multi-class problems when the data is noisy, scarce (relative to the dimension of the problem),…
Risk contributions of portfolios form an indispensable part of risk adjusted performance measurement. The risk contribution of a portfolio, e.g., in the Euler or Aumann-Shapley framework, is given by the partial derivatives of a risk…
In this paper, we revisit the portfolio allocation problem with designated risk-budget [Qian, 2005]. We generalize the problem of arbitrary risk budgets with unequal correlations to one that includes return forecasts and transaction costs…
We revisit the recently introduced concept of return risk measures (RRMs) and extend it by incorporating risk management via multiple so-called eligible assets. The resulting new class of risk measures, termed multi-asset return risk…