Risk Measurement with Spectral Capital Allocation

Ludger Overbeck and Maria Sokolova
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Ludger Overbeck: Universität Gießen, Institut für Mathematik
Maria Sokolova: Moscow State University

Chapter 7 in Applied Quantitative Finance, 2009, pp 139-159 from Springer

Abstract: Spectral risk measures provide the framework to formulate the risk aversion of a firm specifically for each quantile of the loss distribution of a portfolio. More precisely the risk aversion is codified in a weight function, weighting each quantile. Since the basic coherent building blocks of spectral risk measures are expected shortfall measures, the most intuitive approach comes from combinations of those. For investment decisions the marginal risk or the capital allocation is the sensible approach. Since spectral risk measures are coherent there exists also a sensible capital allocation based on the notion of derivatives or more in the light of the coherency approach as an expectation under a generalized maximal scenario.

Keywords: Risk Aversion; Risk Measure; Loss Distribution; Pacific Eastern; Bank Food (search for similar items in EconPapers)
Date: 2009
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-540-69179-2_7

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DOI: 10.1007/978-3-540-69179-2_7

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