Convexity, translation invariance and subadditivity for g-expectations and related risk measures

DOI10.1214/105051607000000294MaRDI QIDQ2476405zbMATH OpenOpenAlexFDO

Authors Long Jiang

Publication date 19 March 2008

Published in The Annals of Applied Probability (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/0801.3340

zbMATH Keywords

\(g\)-expectationbackward stochastic differential equationconvexity of \(g\)-expectationrisk measuretranslation invariance of \(g\)-expectation

Mathematics Subject Classification ID

Stochastic ordinary differential equations (aspects of stochastic analysis) (60H10)

Abstract: Under the continuous assumption on the generator $g$, Briand et al. [Electron. Comm. Probab. 5 (2000) 101--117] showed some connections between $g$ and the conditional $g$-expectation $({mathcalE}_g[cdot|{mathcalF}_t]{)}_{tin[0,T]}$ and Rosazza Gianin [Insurance: Math. Econ. 39 (2006) 19--34] showed some connections between $g$ and the corresponding dynamic risk measure $(h{o}_t^g{)}_{tin[0,T]}$. In this paper we prove that, without the additional continuous assumption on $g$, a $g$-expectation ${mathcalE}_g$ satisfies translation invariance if and only if $g$ is independent of $y$, and ${mathcalE}_g$ satisfies convexity (resp. subadditivity) if and only if $g$ is independent of $y$ and $g$ is convex (resp. subadditive) with respect to $z$. By these conclusions we deduce that the static risk measure $h{o}^g$ induced by a $g$-expectation ${mathcalE}_g$ is a convex (resp. coherent) risk measure if and only if $g$ is independent of $y$ and $g$ is convex (resp. sublinear) with respect to $z$. Our results extend the results in Briand et al. [Electron. Comm. Probab. 5 (2000) 101--117] and Rosazza Gianin [Insurance: Math. Econ. 39 (2006) 19--34] on these subjects.

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