Resource title

Distribution-Invariant Dynamic Risk Measures

Resource image

image for OpenScout resource :: Distribution-Invariant Dynamic Risk Measures

Resource description

The paper provides an axiomatic characterization of dynamic risk measures for multi-period financial positions. For the special case of a terminal cash flow, we require that risk depends on its conditional distribution only. We prove a representation theorem for dynamic risk measures and investigate their relation to static risk measures. Two notions of dynamic consistency are proposed. A key insight of the paper is that dynamic consistency and the notion of ?measure convex sets of probability measures? are intimately related. Measure convexity can be interpreted using the concept of compound lotteries. We characterize the class of static risk measures that represent consistent dynamic risk measures. It turns out that these are closely connected to shortfall risk. Under weak additional assumptions, static convex risk measures coincide with shortfall risk, if compound lotteries of acceptable respectively rejected positions are again acceptable respectively rejected. This result implies a characterization of dynamically consistent convex risk measures.

Resource author

Stefan Weber

Resource publisher

Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/22266

Resource license

Adapt according to the presented license agreement and reference the original author.