Trade-off between robust risk measurement and market principles (Q493244): Difference between revisions
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This paper considers a hedging problem of a representative agent who wishes to determine an optimal hedge for a risky position by minimizing a risk measure subject to a price constraint. Firstly, the author shows that if a good deal exists, the hedging problem has no solution. This result is presented in Proposition 4.1. They also show that if a robust risk measure is used, then a pair of risk measure and pricing kernel generates good deals in a perfect market. This result is presented in Theorem 4.1. Then the authors introduce a minimal distribution-invariant modification of the risk measure with a view to overcoming the existence of a good deal in a perfect market. The form of the minimal distribution-invariant modification of the risk measure is given in Theorem 5.1. The robustness of the minimal distribution-invariant modification of the risk measure is then studied in Section 6. | |||
Property / review text: This paper considers a hedging problem of a representative agent who wishes to determine an optimal hedge for a risky position by minimizing a risk measure subject to a price constraint. Firstly, the author shows that if a good deal exists, the hedging problem has no solution. This result is presented in Proposition 4.1. They also show that if a robust risk measure is used, then a pair of risk measure and pricing kernel generates good deals in a perfect market. This result is presented in Theorem 4.1. Then the authors introduce a minimal distribution-invariant modification of the risk measure with a view to overcoming the existence of a good deal in a perfect market. The form of the minimal distribution-invariant modification of the risk measure is given in Theorem 5.1. The robustness of the minimal distribution-invariant modification of the risk measure is then studied in Section 6. / rank | |||
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Property / reviewed by | |||
Property / reviewed by: Tak Kuen Siu / rank | |||
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Property / Mathematics Subject Classification ID | |||
Property / Mathematics Subject Classification ID: 91B24 / rank | |||
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Property / Mathematics Subject Classification ID | |||
Property / Mathematics Subject Classification ID: 91B30 / rank | |||
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Property / zbMATH DE Number | |||
Property / zbMATH DE Number: 6478098 / rank | |||
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Property / zbMATH Keywords | |||
risk measures | |||
Property / zbMATH Keywords: risk measures / rank | |||
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pricing rules | |||
Property / zbMATH Keywords: pricing rules / rank | |||
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good deals | |||
Property / zbMATH Keywords: good deals / rank | |||
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robustness | |||
Property / zbMATH Keywords: robustness / rank | |||
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representative agent hedging problem | |||
Property / zbMATH Keywords: representative agent hedging problem / rank | |||
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minimal modification | |||
Property / zbMATH Keywords: minimal modification / rank | |||
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Revision as of 23:19, 30 June 2023
scientific article
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English | Trade-off between robust risk measurement and market principles |
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Trade-off between robust risk measurement and market principles (English)
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3 September 2015
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This paper considers a hedging problem of a representative agent who wishes to determine an optimal hedge for a risky position by minimizing a risk measure subject to a price constraint. Firstly, the author shows that if a good deal exists, the hedging problem has no solution. This result is presented in Proposition 4.1. They also show that if a robust risk measure is used, then a pair of risk measure and pricing kernel generates good deals in a perfect market. This result is presented in Theorem 4.1. Then the authors introduce a minimal distribution-invariant modification of the risk measure with a view to overcoming the existence of a good deal in a perfect market. The form of the minimal distribution-invariant modification of the risk measure is given in Theorem 5.1. The robustness of the minimal distribution-invariant modification of the risk measure is then studied in Section 6.
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risk measures
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pricing rules
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good deals
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robustness
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representative agent hedging problem
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minimal modification
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