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Optimal Numeraires for Risk Measures

Author

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  • Damir Filipovic

    (Department of Mathematics, University of Munich)

Abstract

Can the usage of a risky numeraire with a greater than risk free expected return reduce the capital requirements in a solvency test? I will show that this is not the case. In fact, under a reasonable technical condition, there exists no optimal numeraire which yields smaller capital requirements than any other numeraire.

Suggested Citation

  • Damir Filipovic, 2007. "Optimal Numeraires for Risk Measures," Research Paper Series 187, Quantitative Finance Research Centre, University of Technology, Sydney.
    • Handle: RePEc:uts:rpaper:187
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    File URL: https://www.uts.edu.au/sites/default/files/qfr-archive-02/QFR-rp187.pdf
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    References listed on IDEAS

    as
    1. Filipovic, Damir & Kupper, Michael, 2007. "Monotone and cash-invariant convex functions and hulls," Insurance: Mathematics and Economics, Elsevier, vol. 41(1), pages 1-16, July.
    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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    Cited by:

    1. Gianluca Cassese, 2014. "Option Pricing in an Imperfect World," Papers 1406.0412, arXiv.org, revised Sep 2016.
    2. Gianluca Cassese, 2017. "Asset pricing in an imperfect world," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 64(3), pages 539-570, October.
    3. Farkas, Walter & Koch-Medina, Pablo & Munari, Cosimo, 2014. "Capital requirements with defaultable securities," Insurance: Mathematics and Economics, Elsevier, vol. 55(C), pages 58-67.
    4. Walter Farkas & Pablo Koch-Medina & Cosimo Munari, 2012. "Capital requirements with defaultable securities," Papers 1203.4610, arXiv.org, revised Jan 2014.

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