On conditional distortion risk measures under uncertainty

DOI10.1007/S11579-025-00388-0MaRDI QIDQ6913966zbMATH OpenFDO

Authors Shuo Gong, Yijun Hu, Linxiao Wei

Publication date 17 October 2025

Published in Mathematics and Financial Economics (Search for Journal in Brave)

Full work available at URL https://doi.org/10.1007/S11579-025-00388-0

zbMATH Keywords

coherent risk measuresconditional risk measuresdistortion risk measuresmodel uncertainty

Mathematics Subject Classification ID

Statistical methods; risk measures (91G70)

Review text

Risk measures are widely used in various contexts in both finance and insurance. Classical risk measures are defined on random variables. The problem about accurately capturing the true distribution functions of the random variables is the model uncertainty problem. The authors take an auxiliary random variable to describe the model uncertainty. They first establish a conditional distortion risk measure under an auxiliary random variable. Then axiomatically characterize it by proposing a set of new axioms. Moreover, its coherence and dual representation are investigated. Finally, the authors make comparisons with some known risk measures such as weighted value at risk (WVaR), range value at risk (RVaR) and Q-mixture of ES. One advantage of the authors' approach is its flexibility, as the auxiliary random variable can describe various contexts. To illustrate the proposed framework, the authors deduce new risk measures in the presence of background risk.

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Cited in

(1)

• On evaluation of joint risk for nonnegative multivariate risks under dependence uncertainty

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