Related papers: Value at risk and the diversification dogma
The benefits of portfolio diversification is a central tenet implicit to modern financial theory and practice. Linked to diversification is the notion of breadth. Breadth is correctly thought of as the number of in- dependent bets available…
This paper empirically analyzes how individual characteristics are associated with risk aversion, loss aversion, time discounting, and present bias. To this end, we conduct a large-scale demographically representative survey across eight…
A widely applied diversification paradigm is the naive diversification choice heuristic. It stipulates that an economic agent allocates equal decision weights to given choice alternatives independent of their individual characteristics.…
Optimal reinsurance when Value at Risk and expected surplus is balanced through their ratio is studied, and it is demonstrated how results for risk-adjusted surplus can be utilized. Simplifications for large portfolios are derived, and this…
This note presents a kind of the strong law of large numbers for an insurance risk caused by a single catastrophic event rather than by an accumulation of independent and identically distributed risks. We derive this result by a large…
We consider the problem of risk diversification in complex networks. Nodes represent e.g. financial actors, whereas weighted links represent e.g. financial obligations (credits/debts). Each node has a risk to fail because of losses…
We consider the optimal risk sharing problem with a continuum of agents, modeled via a non-atomic measure space. Individual preferences are not assumed to be convex. We show the multiplicity of agents induces the value function to be…
The current work addresses a theme previously unexplored in the literature: that of whether the results arising from research activity in fields other than the scientist's pri-mary field have greater value than the others. Operationally,…
We introduce new mathematical methods to study the optimal portfolio size of investment portfolios over time, considering investors with varying skill levels. First, we explore the benefit of portfolio diversification on an annual basis for…
In this paper, we examine the effect of background risk on portfolio selection and optimal reinsurance design under the criterion of maximizing the probability of reaching a goal. Following the literature, we adopt dependence uncertainty to…
In this paper, we study the risk sharing problem among multiple agents using Lambda Value-at-Risk as their preference functional, under heterogeneous beliefs, where beliefs are represented by several probability measures. We obtain…
In this work the ruin probability of the Lundberg risk process is used as a criterion for determining the optimal security loading of premia in the presence of price-sensitive demand for insurance. Both single and aggregated claim processes…
We evaluate the dependence among the margins of a random vector with Multivariate Extreme Value distribution throughout the expected value of a range and relate this coefficient of dependence with the multivariate tail dependence. Its…
In economics, insurance and finance, value at risk (VaR) is a widely used measure of the risk of loss on a specific portfolio of financial assets. For a given portfolio, time horizon, and probability $\alpha$, the $100\alpha\%$ VaR is…
We provide an axiomatic approach to general premium principles in a probability-free setting that allows for Knightian uncertainty. Every premium principle is the sum of a risk measure, as a generalization of the expected value, and a…
New versions of the set-valued average value at risk for multivariate risks are introduced by generalizing the well-known certainty equivalent representation to the set-valued case. The first "regulator" version is independent from any…
In this paper, we propose a novel axiomatic approach to evaluating the joint risk of multiple insurance risks under dependence uncertainty. Motivated by both the theory of expected utility and the Cobb-Dauglas utility function, we establish…
We introduce the concepts of dependence and independence in a very general framework. We use a concept of rank to study dependence and independence. By means of the rank we identify (total) dependence with inability to create more…
This paper investigates the benefits of incorporating diversification effects into the pricing process of insurance policies from two different business lines. The paper shows that, for the same risk reduction, insurers pricing policies…
The key concepts (calibration, discrimination, and discordance) important in understanding and comparing risk models are best conveyed graphically. To illustrate this, models predicting death and acute kidney injury in a large cohort of PCI…