Liquidity, risk measures, and concentration of measure
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Publication:5219672
DOI10.1287/MOOR.2017.0885zbMATH Open1443.91343arXiv1510.07033OpenAlexW2963835707MaRDI QIDQ5219672FDOQ5219672
Authors: Daniel Lacker 
Publication date: 12 March 2020
Published in: Mathematics of Operations Research (Search for Journal in Brave)
Abstract: Expanding on techniques of concentration of measure, we develop a quantitative framework for modeling liquidity risk using convex risk measures. The fundamental objects of study are curves of the form , where is a convex risk measure and a random variable, and we call such a curve a emph{liquidity risk profile}. The shape of a liquidity risk profile is intimately linked with the tail behavior of the underlying for some notable classes of risk measures, namely shortfall risk measures. We exploit this link to systematically bound liquidity risk profiles from above by other real functions , deriving tractable necessary and sufficient conditions for emph{concentration inequalities} of the form , for all . These concentration inequalities admit useful dual representations related to transport inequalities, and this leads to efficient uniform bounds for liquidity risk profiles for large classes of . On the other hand, some modest new mathematical results emerge from this analysis, including a new characterization of some classical transport-entropy inequalities. Lastly, the analysis is deepened by means of a surprising connection between time consistency properties of law invariant risk measures and the tensorization of concentration inequalities.
Full work available at URL: https://arxiv.org/abs/1510.07033
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Cited In (25)
- Transportation inequalities for stochastic heat equation with rough dependence in space
- Transportation inequalities under uniform metric for a stochastic heat equation driven by time-white and space-colored noise
- Transportation cost inequality for backward stochastic differential equations with mean reflection
- Star-shaped acceptability indexes
- Concentration of dynamic risk measures in a Brownian filtration
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- Quadratic transportation inequalities for SDEs with measurable drift
- Talagrand concentration inequalities for stochastic heat-type equations under uniform distance
- Talagrand concentration inequalities for stochastic partial differential equations
- Talagrand's transportation inequality for SPDEs with locally monotone drifts
- Well-posedness and stationary solutions of McKean-Vlasov (S)PDEs
- A non-exponential extension of Sanov's theorem via convex duality
- A class of dimension-free metrics for the convergence of empirical measures
- Transportation cost inequality for backward stochastic differential equations
- Liquidity risk, price impacts and the replication problem
- Law invariant risk measures and information divergences
- Central limit type theorem and large deviation principle for multi-scale McKean-Vlasov SDEs
- Minkowski deviation measures
- Scalar multivariate risk measures with a single eligible asset
- A characterization of transportation-information inequalities for Markov processes in terms of dimension-free concentration
- Nonparametric estimation for interacting particle systems: McKean-Vlasov models
- Star-shaped deviations
- Functional inequalities for forward and backward diffusions
- Concentration inequality of sums of dependent subexponential random variables and application to bounds for value-at-risk
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