Risk sharing for capital requirements with multidimensional security markets

Felix-Benedikt Liebrich () and Gregor Svindland ()
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Felix-Benedikt Liebrich: University of Munich
Gregor Svindland: University of Munich

Finance and Stochastics, 2019, vol. 23, issue 4, No 5, 925-973

Abstract: Abstract We consider the risk sharing problem for capital requirements induced by capital adequacy tests and security markets. The agents involved in the sharing procedure may be heterogeneous in that they apply varying capital adequacy tests and have access to different security markets. We discuss conditions under which there exists a representative agent. Thereafter, we study two frameworks of capital adequacy more closely, namely polyhedral constraints and distribution-based constraints. We prove existence of optimal risk allocations and equilibria within these frameworks and elaborate on their robustness.

Keywords: Capital requirements; Polyhedral acceptance sets; Law-invariant acceptance sets; Multidimensional security spaces; Pareto-optimal risk allocations; Equilibria; Robustness of optimal allocations; 91B16; 91B30; 91B32; 91B50 (search for similar items in EconPapers)
JEL-codes: D52 D53 G12 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (12)

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DOI: 10.1007/s00780-019-00402-6

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