Optimal Capital and Risk Allocations for Law-and Cash-Invariant Convex Functions

In this paper we provide the complete solution to the existence and characterization problem of optimal capital and risk allocations for not necessarily monotone, law-invariant convex risk measures on the model space Lp, for any p ε [1;∞]. Our main result says that the capital and risk allocation problem always admits a solution via contracts whose payoffs are defined as increasing Lipschitz continuous functions of the aggregate risk.


Published in:
Finance and Stochastics , 12, 423-439
Year:
2008
Publisher:
Springer Verlag
ISSN:
0949-2984
Laboratories:




 Record created 2010-04-24, last modified 2018-03-17

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