RVaR Hedging and Market Completions

Ilia Vasilev () and Alexander Melnikov ()
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Ilia Vasilev: University of Alberta
Alexander Melnikov: University of Alberta

A chapter in Mathematical and Statistical Methods for Actuarial Sciences and Finance, 2022, pp 429-434 from Springer

Abstract: Abstract The problem of partial hedging is very important in the modern risk management industry. It is known that the key element of this problem is a risk measure chosen for assessment of risks. Two of the most widely used risk measures in the industry nowadays are Value-at-Risk (VaR) and Expected Shortfall (CVaR). However, it has been demonstrated recently that both of these measures could be incorporated into one two-parametric risk measure called Range Value-at-Risk (RVaR). In this paper we focus on demonstration that partial hedging problem with respect to RVaR in incomplete market could be approached with the help of method of market completions through the Utility Maximization task embedded into RVaR optimization problem.

Keywords: Range Value at Risk; Incomplete market; Method of market completions; Partial hedging (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-030-99638-3_69

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DOI: 10.1007/978-3-030-99638-3_69

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