COHERENT PORTFOLIO SEPARATION — INHERENT SYSTEMIC RISK?

Nils Chr. Framstad ()
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Nils Chr. Framstad: The Financial Supervisory Authority of Norway (Kredittilsynet), P.O. Box 100 Bryn, NO-0611 Oslo, Norway

International Journal of Theoretical and Applied Finance (IJTAF), 2004, vol. 07, issue 07, 909-917

Abstract: A stylized market risk model is studied. It turns out that quantifying risk by quantile-VaR, coherent risk measures or other functionals that are positively homogeneous, has a consequence akin to assuming multi-normal returns, namely a two fund separation property. Heuristic arguments indicate that this may be a source of systemic risk to the financial industry.

Keywords: Risk measures; market risk; portfolio separation; systemic risk (search for similar items in EconPapers)
Date: 2004
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DOI: 10.1142/S0219024904002712

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