Combining multi-asset and intrinsic risk measures

Christian Laudagé, Jörn Sass and Jörg Wenzel

Insurance: Mathematics and Economics, 2022, vol. 106, issue C, 254-269

Abstract: The risk of a future payoff is commonly quantified by calculating the costs of a hedging portfolio such that the resulting position is acceptable, i.e., that it passes a capital adequacy test. A multi-asset risk measure describes the minimal external capital which has to be raised into multiple eligible assets to make a future position acceptable. Recently, the alternative methodology of intrinsic risk measures was introduced in the literature. These ask for the minimal proportion of the financial position which has to be reallocated to pass the capital adequacy test, i.e., only internal capital is used.

Keywords: Intrinsic risk measure; Multi-asset risk measure; Multiple eligible assets; Diversification; Expected Shortfall (search for similar items in EconPapers)
JEL-codes: C65 G11 G32 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:insuma:v:106:y:2022:i:c:p:254-269

DOI: 10.1016/j.insmatheco.2022.07.005

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