The Axiomatic Approach to Risk Measures for Capital Determination

Hans Föllmer () and Stefan Weber ()
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Hans Föllmer: Institut für Mathematik, Humboldt-Universität zu Berlin, 10099 Berlin, Germany
Stefan Weber: Institut für Mathematische Stochastik, Leibniz Universität Hannover, 30167 Hannover, Germany

Annual Review of Financial Economics, 2015, vol. 7, issue 1, 301-337

Abstract: The quantification of downside risk in terms of capital requirements is a key issue for both regulators and the financial industry. This review presents the axiomatic approach, which is based on monetary risk measures. These provide a unifying mathematical framework for the determination of capital requirements, for economic indices of riskiness, and for the analysis of preferences in the face of risk and Knightian uncertainty. In the special case of distribution-based risk measures, we review recent advances in characterizing their statistical properties such as elicitability and robustness.

Keywords: capital requirements; elicitability; indices of riskiness; monetary risk measures; robustness; variational preferences (search for similar items in EconPapers)
JEL-codes: C44 C5 D81 G01 G1 G2 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (28)

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