Good deal bounds induced by shortfall risk

DOI10.1137/090769120MaRDI QIDQ3074983zbMATH OpenOpenAlexFDO

Authors Takuji Arai

Publication date 10 February 2011

Published in SIAM Journal on Financial Mathematics (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/0802.4141

zbMATH Keywords

convex risk measureOrlicz spaceshortfallgood deal boundpredictably convex

Mathematics Subject Classification ID

Portfolio theory (91G10) Applications of functional analysis in optimization, convex analysis, mathematical programming, economics (46N10) Stochastic integrals (60H05)

Abstract: We shall provide in this paper good deal pricing bounds for contingent claims induced by the shortfall risk with some loss function. Assumptions we impose on loss functions and contingent claims are very mild. We prove that the upper and lower bounds of good deal pricing bounds are expressed by convex risk measures on Orlicz hearts. In addition, we obtain its representation with the minimal penalty function. Moreover, we give a representation, for two simple cases, of good deal bounds and calculate the optimal strategies when a claim is traded at the upper or lower bounds of its good deal pricing bound.

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Cited in

(10)

• Convex risk measures for good deal bounds
• Convex risk measures on Orlicz spaces: inf-convolution and shortfall
• Good deal indices in asset pricing: actuarial and financial implications
• Robustness of Delta Hedging in a Jump-Diffusion Model
• Beyond cash-additive risk measures: when changing the numéraire fails
• Fundamental theorem of asset pricing with acceptable risk in markets with frictions
• Good deals in markets with friction
• Measuring risk with multiple eligible assets
• Maximum Lebesgue extension of monotone convex functions
• GOOD DEAL BOUNDS WITH CONVEX CONSTRAINTS

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