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Stable Allocations of Risk

Author

Listed:
  • Peter Csoka

    (Department Economics, Universiteit of Maastricht)

  • P. Jean-Jacques Herings,

    (Department of Economics, Universiteit Maastricht,)

  • Laszlo A. Koczy

    (Department of Economics, Universiteit Maastricht,)

Abstract

Measuring risk can be axiomatized by the concept of coherent measures of risk. A risk environment specifies some individual portfolios' realization vectors and a coherent measure of risk. We consider sharing the risk of the aggregate portfolio by studying transferable utility cooperative games: risk allocation games. We show that the class of risk allocation games coincides with the class of totally balanced games. As a limit case the aggregate portfolio can have the same payoff in all states of nature. We prove that the class of risk allocation games with no aggregate uncertainty coincides with the class of exact games.

Suggested Citation

  • Peter Csoka & P. Jean-Jacques Herings, & Laszlo A. Koczy, 2007. "Stable Allocations of Risk," CERS-IE WORKING PAPERS 0704, Institute of Economics, Centre for Economic and Regional Studies.
    • Handle: RePEc:has:discpr:0704
    as

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    References listed on IDEAS

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    More about this item

    Keywords

    Coherent Measures of Risk; Risk Allocation Games; Totally Balanced Games; Exact Games;
    All these keywords.

    JEL classification:

    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games

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