Related papers: Value at risk and the diversification dogma

Diversification is usually viewed as a reliable way to reduce risk, yet it can dramatically fail for heavy-tailed losses with infinite mean: pooling independent losses of this type may increase tail risk at every threshold. We study this…

Several rules for social choice are examined from a unifying point of view that looks at them as procedures for revising a system of degrees of belief in accordance with certain specified logical constraints. Belief is here a social…

We present an approach to derivative exposure management based on subjective and implied probabilities. We suggest to maximize the valuation difference subject to risk constraints and propose a class of risk measures derived from the…

We show that under plausible levels of background risk, no theory of choice under risk -- such as expected utility theory, prospect theory, or rank dependent utility -- can simultaneously satisfy the following three economic postulates: (i)…

The option is a financial derivative, which is regularly employed in reducing the risk of its underlying securities. However, investing in option is still risky. Such risk becomes much severer for speculators who utilize option as a means…

We study combinations of risk measures under no restrictive assumption on the set of alternatives. We develop and discuss results regarding the preservation of properties and acceptance sets for the combinations of risk measures. One of the…

Most theories of evolutionary diversification are based on equilibrium assumptions: they are either based on optimality arguments involving static fitness landscapes, or they assume that populations first evolve to an equilibrium state…

We consider the problem of minimizing capital at risk in the Black-Scholes setting. The portfolio problem is studied given the possibility that a correlation constraint between the portfolio and a financial index is imposed. The optimal…

Lehmann's ideas on concepts of dependence have had a profound effect on mathematical theory of reliability. The aim of this paper is two-fold. The first is to show how the notion of a ``hazard potential'' can provide an explanation for the…

Risk assessment under different possible scenarios is a source of uncertainty that may lead to concerning financial losses. We address this issue, first, by adapting a robust framework to the class of spectral risk measures. Second, we…

This paper examines the possibility of using derivative-implied risk premia to explain stock returns. The rapid development of derivative markets has led to the possibility of trading various kinds of risks, such as credit and interest rate…

All people have to make risky decisions in everyday life. And we do not know how true they are. But is it possible to mathematically assess the correctness of our choice? This article discusses the model of decision making under risk on the…

Statistical inferential results generally come with a measure of reliability for decision-making purposes. For a policy implementer, the value of implementing published policy research depends critically upon this reliability. For a policy…

Motivated by the analysis of a general optimal portfolio selection problem, which encompasses as special cases an optimal consumption and an optimal debt-arrangement problem, we are concerned with the questions of how a personality trait…

Values are things that are important to us. Actions activate values - they either go against our values or they promote our values. Values themselves can either be conforming or conflicting depending on the action that is taken. In this…

This study develops a multi-factor framework where not only market risk is considered but also potential changes in the investment opportunity set. Although previous studies find no clear evidence about a positive and significant relation…

Applied researchers often claim that the risk difference is more heterogeneous than the relative risk and the odds ratio. Some also argue that there are theoretical grounds for why this claim is true. In this note, we point out that these…

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…

By means of the techniques of Boolean valued analysis, we provide a transfer principle between duality theory of classical convex risk measures and duality theory of conditional risk measures. Namely, a conditional risk measure can be…

We use the theory of cooperative games for the design of fair insurance contracts. An insurance contract needs to specify the premium to be paid and a possible participation in the benefit (or surplus) of the company. It results from the…