Dynamic capital allocation rules via BSDEs: an axiomatic approach

Elisa Mastrogiacomo () and Emanuela Rosazza Gianin ()
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Elisa Mastrogiacomo: Università dell’Insubria
Emanuela Rosazza Gianin: University of Milano Bicocca

Annals of Operations Research, 2024, vol. 336, issue 1, No 24, 749-772

Abstract: Abstract In this paper, we study capital allocation for dynamic risk measures, with an axiomatic approach but also by exploiting the relation between risk measures and BSDEs. Although there is a wide literature on capital allocation rules in a static setting and on dynamic risk measures, only a few recent papers on capital allocation work in a dynamic setting and, moreover, those papers mainly focus on the gradient approach. To fill this gap, we then discuss new perspectives to the capital allocation problem going beyond those already existing in the literature. In particular, we introduce and investigate a general axiomatic approach to dynamic capital allocations as well as an approach suitable for risk measures induced by g-expectations under weaker assumptions than Gateaux differentiability.

Keywords: Risk measures; Capital allocation; BSDE; g-expectation; Subdifferential; Gradient (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s10479-022-04917-8

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