Diversification, protection of liability holders and regulatory arbitrage

Koch-Médina, Pablo; Munari, Cosimo-Andrea; Sikic, Mario

doi:10.1007/s11579-016-0171-y

Cited by 16 publications

(2 citation statements)

References 13 publications

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“…The numéraire invariance axiom is introduced by Artzner et al (2009) and further investigated by Koch-Medina et al (2017). It means that the acceptance set should not depend on the choice of the numéraire asset.…”

Section: Positive Inclusion: Xmentioning

confidence: 99%

“…In contrast, Koch-Medina et al (2015) find that the acceptance set associated with ES, i.e., A = {X ∈ X | ES α (X ) ≤ 0}, is not surplus invariant. Koch-Medina et al (2015, 2017 provide dual characterizations of convex and surplus-invariant acceptance sets. Furthermore, they prove that the only coherent acceptance set that is simultaneously law invariant and surplus invariant is the positive cone L…”

Section: Positive Inclusion: Xmentioning

confidence: 99%

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Risk Measures: Robustness, Elicitability, and Backtesting

Kou

Peng

2022

Annu. Rev. Stat. Appl.

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Risk measures are used not only for financial institutions’ internal risk management but also for external regulation (e.g., in the Basel Accord for calculating the regulatory capital requirements for financial institutions). Though fundamental in risk management, how to select a good risk measure is a controversial issue. We review the literature on risk measures, particularly on issues such as subadditivity, robustness, elicitability, and backtesting. We also aim to clarify some misconceptions and confusions in the literature. In particular, we argue that, despite lacking some mathematical convenience, the median shortfall—that is, the median of the tail loss distribution—is a better option than the expected shortfall for setting the Basel Accords capital requirements due to statistical and economic considerations such as capturing tail risk, robustness, elicitability, backtesting, and surplus invariance. Expected final online publication date for the Annual Review of Statistics, Volume 9 is March 2022. Please see http://www.annualreviews.org/page/journal/pubdates for revised estimates.

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Section: Positive Inclusion: Xmentioning

confidence: 99%

Section: Positive Inclusion: Xmentioning

confidence: 99%

Risk Measures: Robustness, Elicitability, and Backtesting

Kou

Peng

2022

Annu. Rev. Stat. Appl.

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Fundamental theorem of asset pricing with acceptable risk in markets with frictions

Arduca

Munari

2023

Finance Stoch

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We study the range of prices at which a rational agent should contemplate transacting a financial contract outside a given market. Trading is subject to nonproportional transaction costs and portfolio constraints, and full replication by way of market instruments is not always possible. Rationality is defined in terms of consistency with market prices and acceptable risk thresholds. We obtain a direct and a dual description of market-consistent prices with acceptable risk. The dual characterisation requires an appropriate extension of the classical fundamental theorem of asset pricing where the role of arbitrage opportunities is played by good deals, i.e., costless investment opportunities with acceptable risk–reward tradeoff. In particular, we highlight the importance of scalable good deals, i.e., investment opportunities that are good deals regardless of their volume.

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