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Multivariate risks and depth-trimmed regions

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  • Ignacio Cascos
  • Ilya Molchanov

Abstract

We describe a general framework for measuring risks, where the risk measure takes values in an abstract cone. It is shown that this approach naturally includes the classical risk measures and set-valued risk measures and yields a natural definition of vector-valued risk measures. Several main constructions of risk measures are described in this abstract axiomatic framework. It is shown that the concept of depth-trimmed (or central) regions from the multivariate statistics is closely related to the definition of risk measures. In particular, the halfspace trimming corresponds to the Value-at-Risk, while the zonoid trimming yields the expected shortfall. In the abstract framework, it is shown how to establish a both-ways correspondence between risk measures and depth-trimmed regions. It is also demonstrated how the lattice structure of the space of risk values influences this relationship.

Suggested Citation

  • Ignacio Cascos & Ilya Molchanov, 2006. "Multivariate risks and depth-trimmed regions," Papers math/0606520, arXiv.org, revised Nov 2006.
    • Handle: RePEc:arx:papers:math/0606520
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    References listed on IDEAS

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