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Coherent and convex monetary risk measures for bounded càdlàg processes

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  • Cheridito, Patrick
  • Delbaen, Freddy
  • Kupper, Michael

Abstract

If the random future evolution of values is modelled in continuous time, then a risk measure can be viewed as a functional on a space of continuous-time stochastic processes. We extend the notions of coherent and convex monetary risk measures to the space of bounded càdlàg processes that are adapted to a given filtration. Then, we prove representation results that generalize earlier results for one- and multi-period risk measures, and we discuss some examples.

Suggested Citation

  • Cheridito, Patrick & Delbaen, Freddy & Kupper, Michael, 2004. "Coherent and convex monetary risk measures for bounded càdlàg processes," Stochastic Processes and their Applications, Elsevier, vol. 112(1), pages 1-22, July.
    • Handle: RePEc:eee:spapps:v:112:y:2004:i:1:p:1-22
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    References listed on IDEAS

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    1. Epstein, Larry G. & Schneider, Martin, 2003. "Recursive multiple-priors," Journal of Economic Theory, Elsevier, vol. 113(1), pages 1-31, November.
    2. Philippe Artzner & Freddy Delbaen & Jean‐Marc Eber & David Heath, 1999. "Coherent Measures of Risk," Mathematical Finance, Wiley Blackwell, vol. 9(3), pages 203-228, July.
    3. Hans Föllmer & Alexander Schied, 2002. "Convex measures of risk and trading constraints," Finance and Stochastics, Springer, vol. 6(4), pages 429-447.
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    Citations

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    Cited by:

    1. Ji, Ronglin & Shi, Xuejun & Wang, Shijie & Zhou, Jinming, 2019. "Dynamic risk measures for processes via backward stochastic differential equations," Insurance: Mathematics and Economics, Elsevier, vol. 86(C), pages 43-50.
    2. Fasen Vicky & Svejda Adela, 2012. "Time consistency of multi-period distortion measures," Statistics & Risk Modeling, De Gruyter, vol. 29(2), pages 133-153, June.
    3. Andreas H Hamel, 2018. "Monetary Measures of Risk," Papers 1812.04354, arXiv.org.
    4. Hirbod Assa & Manuel Morales & Hassan Omidi Firouzi, 2016. "On the Capital Allocation Problem for a New Coherent Risk Measure in Collective Risk Theory," Risks, MDPI, vol. 4(3), pages 1-20, August.
    5. Daniel Bartl, 2016. "Conditional nonlinear expectations," Papers 1612.09103, arXiv.org, revised Mar 2019.
    6. Traian A. Pirvu & Gordan Žitković, 2009. "Maximizing The Growth Rate Under Risk Constraints," Mathematical Finance, Wiley Blackwell, vol. 19(3), pages 423-455, July.
    7. Marlon Moresco & M'elina Mailhot & Silvana M. Pesenti, 2023. "Uncertainty Propagation and Dynamic Robust Risk Measures," Papers 2308.12856, arXiv.org, revised Feb 2024.
    8. Yanhong Chen & Zachary Feinstein, 2022. "Set-valued dynamic risk measures for processes and for vectors," Finance and Stochastics, Springer, vol. 26(3), pages 505-533, July.
    9. Acciaio, Beatrice & Föllmer, Hans & Penner, Irina, 2012. "Risk assessment for uncertain cash flows: model ambiguity, discounting ambiguity, and the role of bubbles," LSE Research Online Documents on Economics 50118, London School of Economics and Political Science, LSE Library.
    10. Irina Penner & Anthony Réveillac, 2015. "Risk measures for processes and BSDEs," Finance and Stochastics, Springer, vol. 19(1), pages 23-66, January.
    11. Elisa Mastrogiacomo & Emanuela Rosazza Gianin, 2019. "Time-consistency of risk measures: how strong is such a property?," Decisions in Economics and Finance, Springer;Associazione per la Matematica, vol. 42(1), pages 287-317, June.
    12. Eisele Karl-Theodor & Kupper Michael, 2016. "Asymptotically stable dynamic risk assessments," Statistics & Risk Modeling, De Gruyter, vol. 33(1-2), pages 41-50, September.
    13. Nakano Yumiharu, 2006. "Mean-risk optimization for index tracking," Statistics & Risk Modeling, De Gruyter, vol. 24(1/2006), pages 1-19, July.
    14. Harry Joe & Haijun Li, 2011. "Tail Risk of Multivariate Regular Variation," Methodology and Computing in Applied Probability, Springer, vol. 13(4), pages 671-693, December.
    15. Christos E. Kountzakis & Damiano Rossello, 2022. "Monetary risk measures for stochastic processes via Orlicz duality," Decisions in Economics and Finance, Springer;Associazione per la Matematica, vol. 45(1), pages 35-56, June.
    16. Marco Frittelli & Giacomo Scandolo, 2006. "Risk Measures And Capital Requirements For Processes," Mathematical Finance, Wiley Blackwell, vol. 16(4), pages 589-612, October.
    17. Bentahar, Imen, 2006. "Tail Conditional Expectation for vector-valued risks," SFB 649 Discussion Papers 2006-029, Humboldt University Berlin, Collaborative Research Center 649: Economic Risk.
    18. Walter Farkas & Ludovic Mathys & Nikola Vasiljević, 2021. "Intra‐Horizon expected shortfall and risk structure in models with jumps," Mathematical Finance, Wiley Blackwell, vol. 31(2), pages 772-823, April.
    19. repec:hum:wpaper:sfb649dp2006-029 is not listed on IDEAS
    20. Alexander S. Cherny, 2009. "Capital Allocation And Risk Contribution With Discrete‐Time Coherent Risk," Mathematical Finance, Wiley Blackwell, vol. 19(1), pages 13-40, January.

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