Related papers: Risk measures beyond frictionless markets
In this paper we develop a novel methodology for estimation of risk capital allocation. The methodology is rooted in the theory of risk measures. We work within a general, but tractable class of law-invariant coherent risk measures, with a…
We extend techniques and learnings about the stochastic properties of nonlinear responses from finance to medicine, particularly oncology where it can inform dosing and intervention. We define antifragility. We propose uses of risk analysis…
Portfolio optimization has long been dominated by covariance-based strategies, such as the Markowitz Mean-Variance framework. However, these approaches often fail to ensure a balanced risk structure across assets, leading to concentration…
This paper introduces a relative model risk measure of a product priced with a given model, with respect to another reference model for which the market is assumed to be driven. This measure allows comparing products valued with different…
We develop a statistical framework for risk estimation, inspired by the axiomatic theory of risk measures. Coherent risk estimators -- functionals of P\&L samples inheriting the economic properties of risk measures -- are defined and…
The aim of this study is to present proofs for new theorems. Basic thoughts of new definitions emerge from the decision-making under uncertainty in economics and finance. Shape of the certain utility curve is central to standard definitions…
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…
We consider a collection of derivatives that depend on the price of an underlying asset at expiration or maturity. The absence of arbitrage is equivalent to the existence of a risk-neutral probability distribution on the price; in…
The theory of acceptance sets and their associated risk measures plays a key role in the design of capital adequacy tests. The objective of this paper is to investigate, in the context of bounded financial positions, the class of…
Model risk measures consequences of choosing a model in a class of possible alternatives. We find analytical and simulated bounds for payoff functions on classes of plausible alternatives of a given discrete model. We measure the impact of…
We revisit the problem of portfolio selection, where an investor maximizes utility subject to a risk constraint. Our framework is very general and accommodates a wide range of utility and risk functionals, including non-concave utilities…
Measures of risk concentration and their asymptotic behavior for portfolios with heavy-tailed risk factors is of interest in risk management. Second order regular variation is a structural assumption often imposed on such risk factors to…
We consider an optimal investment and risk control problem for an insurer under the mean-variance (MV) criterion. By introducing a deterministic auxiliary process defined forward in time, we formulate an alternative time-consistent problem…
We review the recently introduced concept of variety of a financial portfolio and we sketch its importance for risk control purposes. The empirical behaviour of variety, correlation, exceedance correlation and asymmetry of the probability…
This survey gives an introduction to monetary measures of risk as monotone and cash additive functions on spaces of univariate random variables. Primal and dual representation results as well as several examples are discussed. Principal…
We develop an approach to risk minimization and stochastic optimization that provides a convex surrogate for variance, allowing near-optimal and computationally efficient trading between approximation and estimation error. Our approach…
The use of non-translation invariant risk measures within the equal risk pricing (ERP) methodology for the valuation of financial derivatives is investigated. The ability to move beyond the class of convex risk measures considered in…
Due to their heterogeneity, insurance risks can be properly described as a mixture of different fixed models, where the weights assigned to each model may be estimated empirically from a sample of available data. If a risk measure is…
This paper applies risk analysis to medical problems, through the properties of nonlinear responses (convex or concave). It shows 1) necessary relations between the nonlinearity of dose-response and the statistical properties of the…
Risk aversion plays a significant and central role in investors' decisions in the process of developing a portfolio. In this framework of portfolio optimization we determine the portfolio that possesses the minimal risk by using a new…