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On optimal allocation of risk vectors

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  • Kiesel, Swen
  • Rüschendorf, Ludger

Abstract

In this paper we extend results on optimal risk allocations for portfolios of real risks w.r.t. convex risk functionals to portfolios of risk vectors. In particular we characterize optimal allocations minimizing the total risk as well as Pareto optimal allocations. Optimal risk allocations are shown to exhibit a worst case dependence structure w.r.t. some specific max-correlation risk measure and they are comonotone w.r.t. a common worst case scenario measure. We also derive a new existence criterion for optimal risk allocations and discuss some examples.

Suggested Citation

  • Kiesel, Swen & Rüschendorf, Ludger, 2010. "On optimal allocation of risk vectors," Insurance: Mathematics and Economics, Elsevier, vol. 47(2), pages 167-175, October.
    • Handle: RePEc:eee:insuma:v:47:y:2010:i:2:p:167-175
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    1. repec:dau:papers:123456789/9738 is not listed on IDEAS
    2. Kiesel Swen & Rüschendorf Ludger, 2014. "Optimal risk allocation for convex risk functionals in general risk domains," Statistics & Risk Modeling, De Gruyter, vol. 31(3-4), pages 335-365, December.
    3. Andreas Haier & Ilya Molchanov & Michael Schmutz, 2015. "Intragroup transfers, intragroup diversification and their risk assessment," Papers 1511.06320, arXiv.org, revised Nov 2016.
    4. Andreas Haier & Ilya Molchanov & Michael Schmutz, 2016. "Intragroup transfers, intragroup diversification and their risk assessment," Annals of Finance, Springer, vol. 12(3), pages 363-392, December.
    5. repec:hal:wpaper:halshs-00664074 is not listed on IDEAS
    6. Asimit, Alexandru V. & Badescu, Alexandru M. & Haberman, Steven & Kim, Eun-Seok, 2016. "Efficient risk allocation within a non-life insurance group under Solvency II Regime," Insurance: Mathematics and Economics, Elsevier, vol. 66(C), pages 69-76.
    7. Ekeland Ivar & Schachermayer Walter, 2011. "Law invariant risk measures on L∞ (ℝd)," Statistics & Risk Modeling, De Gruyter, vol. 28(3), pages 195-225, September.
    8. Luciano Campi & Elyès Jouini & Vincent Porte, 2013. "Efficient portfolios in financial markets with proportional transaction costs," Post-Print halshs-00664074, HAL.

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