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MULTIVARIATE RISK MEASURES: A CONSTRUCTIVE APPROACH BASED ON SELECTIONS
Author(s) -
Molchanov Ilya,
Cascos Ignacio
Publication year - 2016
Publication title -
mathematical finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.98
H-Index - 81
eISSN - 1467-9965
pISSN - 0960-1627
DOI - 10.1111/mafi.12078
Subject(s) - coherent risk measure , risk measure , spectral risk measure , mathematics , dynamic risk measure , portfolio , econometrics , measure (data warehouse) , dual representation , mathematical economics , portfolio optimization , economics , computer science , dual (grammatical number) , financial economics , art , literature , database
Since risky positions in multivariate portfolios can be offset by various choices of capital requirements that depend on the exchange rules and related transaction costs, it is natural to assume that the risk measures of random vectors are set‐valued. Furthermore, it is reasonable to include the exchange rules in the argument of the risk measure and so consider risk measures of set‐valued portfolios. This situation includes the classical Kabanov's transaction costs model, where the set‐valued portfolio is given by the sum of a random vector and an exchange cone, but also a number of further cases of additional liquidity constraints. We suggest a definition of the risk measure based on calling a set‐valued portfolio acceptable if it possesses a selection with all individually acceptable marginals. The obtained selection risk measure is coherent (or convex), law invariant, and has values being upper convex closed sets. We describe the dual representation of the selection risk measure and suggest efficient ways of approximating it from below and from above. In the case of Kabanov's exchange cone model, it is shown how the selection risk measure relates to the set‐valued risk measures considered by Kulikov (2008, Theory Probab. Appl . 52, 614–635), Hamel and Heyde (2010, SIAM J. Financ. Math . 1, 66–95), and Hamel, Heyde, and Rudloff (2013, Math. Financ. Econ . 5, 1–28).