Risk measures on P( R) and value at risk with probability/loss function

DOI10.1111/MAFI.12028MaRDI QIDQ2875724zbMATH OpenOpenAlexFDO

Authors Marco Maggis, Ilaria Peri, Marco Frittelli

Publication date 11 August 2014

Published in Mathematical Finance (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1201.2257

zbMATH Keywords

distribution functionsdual representationlaw invariant risk measuresquantilesquasi-convex functionsvalue at risk

Mathematics Subject Classification ID

Probability distributions: general theory (60E05) Applications of statistics to economics (62P20)

Abstract: We propose a generalization of the classical notion of the $$ that takes into account not only the probability of the losses, but the balance between such probability and the amount of the loss. This is obtained by defining a new class of law invariant risk measures based on an appropriate family of acceptance sets. The $$ and other known law invariant risk measures turn out to be special cases of our proposal. We further prove the dual representation of Risk Measures on $mathcalP(\mathrm{\%}mathbbR).$

Review text

The authors define a new class of law invariant risk measures \(\Phi:\mathcal P(\mathbb R)\rightarrow \mathbb R\cup \{+\infty\}\) on the set \(\mathcal P(\mathbb R)\) of probability measures on \(\mathbb R\). These measures are based on an appropriate family of acceptance sets. They are monotone and quasi-convex. The proposition is a generalization of the classical notion of \(\mathrm{VaR}_\lambda\), that takes into account the balance between the probability and the amount of the loss. The dual representation of the risk measures on \(\mathcal P(\mathbb R)\) is also proven.

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Cites work

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Cited in

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• Are law-invariant risk functions concave on distributions?
• A dynamic analytic method for risk-aware controlled martingale problems
• Risk quantization by magnitude and propensity
• Law-invariant return and star-shaped risk measures
• Star-shaped acceptability indexes
• Robust -quantiles and extremal distributions
• Optimal insurance design with lambda-value-at-risk
• Risk measures on Musielak-Orlicz spaces: a state-dependent perspective for insurance
• Max- and min-stability under first-order stochastic dominance
• Optimal risk sharing for lambda value-at-risk
• Deconstructing systemic risk: a reverse stress testing approach
• Numerical methods for lambda quantiles: robust evaluation and portfolio optimization

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