Related papers: Fair Estimation of Capital Risk Allocation
Capital allocation principles are used in various contexts in which a risk capital or a cost of an aggregate position has to be allocated among its constituent parts. We study capital allocation principles in a performance measurement…
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…
Capital allocation is a procedure for quantifying the contribution of each source of risk to aggregated risk. The gradient allocation rule, also known as the Euler principle, is a prevalent rule of capital allocation under which the…
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…
We consider a variation on the classical finance problem of optimal portfolio design. In our setting, a large population of consumers is drawn from some distribution over risk tolerances, and each consumer must be assigned to a portfolio of…
The ongoing concern about systemic risk since the outburst of the global financial crisis has highlighted the need for risk measures at the level of sets of interconnected financial components, such as portfolios, institutions or members of…
Financial institutions have to allocate so-called "economic capital" in order to guarantee solvency to their clients and counter parties. Mathematically speaking, any methodology of allocating capital is a "risk measure", i.e. a function…
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…
In general, underestimation of risk is something which should be avoided as far as possible. Especially in financial asset management, equity risk is typically characterized by the measure of portfolio variance, or indirectly by quantities…
We study resource allocation in two-sided markets from a fundamental perspective and introduce a general modeling and algorithmic framework to effectively incorporate the complex and multidimensional aspects of fairness. Our main technical…
In our previous paper, "A Unified Approach to Systemic Risk Measures via Acceptance Set" (\textit{Mathematical Finance, 2018}), we have introduced a general class of systemic risk measures that allow for random allocations to individual…
The paper provides a framework for the assessment and optimization of the total risk of complex distributed systems. The framework takes into account the risk of each agent, which may arise from heterogeneous sources, as well as the risk…
The aim of this paper is to study a new methodological framework for systemic risk measures by applying deep learning method as a tool to compute the optimal strategy of capital allocations. Under this new framework, systemic risk measures…
Randomized experiments have been the gold standard for assessing the effectiveness of a treatment or policy. The classical complete randomization approach assigns treatments based on a prespecified probability and may lead to inefficient…
The estimation of risk measures recently gained a lot of attention, partly because of the backtesting issues of expected shortfall related to elicitability. In this work we shed a new and fundamental light on optimal estimation procedures…
We address the problem that classical risk measures may not detect the tail risk adequately. This can occur for instance due to averaging when calculating the Expected Shortfall. The current literature proposes the so-called adjusted…
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…
The assessment of risk based on historical data faces many challenges, in particular due to the limited amount of available data, lack of stationarity, and heavy tails. While estimation on a short-term horizon for less extreme percentiles…
We analyze multiline pricing and capital allocation in equilibrium no-arbitrage markets. Existing theories often assume a perfect complete market, but when pricing is linear, there is no diversification benefit from risk pooling and…
Capital allocation is a procedure used to assess the risk contributions of individual risk components to the total risk of a portfolio. While the conditional tail expectation (CTE)-based capital allocation is arguably the most popular…