Value-at-risk under ambiguity aversion

Rossella Agliardi ()
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Rossella Agliardi: University of Bologna

Financial Innovation, 2018, vol. 4, issue 1, 1-13

Abstract: Abstract This study explored the effects of ambiguity on the calculation of Value-at-Risk (VaR) using a mathematical model based on the theory of Choquet-Brownian processes. It was found that while a moderate degree of ambiguity aversion yields a higher value for VaR and Expected Shortfall (ES), the result can be reversed in a deeply ambiguous environment. Additionally, some sufficient conditions are provided for the preservation of this effect under various forms of risk aggregation. This study offers a new perspective to full awareness on capital requirement calculation as requested by international regulation.

Keywords: Choquet-Brownian motion; Risk measures; Ambiguity aversion (search for similar items in EconPapers)
Date: 2018
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DOI: 10.1186/s40854-018-0095-z

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