COMPOSITION OF TIME-CONSISTENT DYNAMIC MONETARY RISK MEASURES IN DISCRETE TIME

Patrick Cheridito () and Michael Kupper
Additional contact information
Patrick Cheridito: ORFE, Princeton University, Princeton, NJ 08544, USA
Michael Kupper: Department of Mathematics Humboldt University Berlin 10099 Berlin, Germany

International Journal of Theoretical and Applied Finance (IJTAF), 2011, vol. 14, issue 01, 137-162

Abstract: In discrete time, every time-consistent dynamic monetary risk measure can be written as a composition of one-step risk measures. We exploit this structure to give new dual representation results for time-consistent convex monetary risk measures in terms of one-step penalty functions. We first study risk measures for random variables modelling financial positions at a fixed future time. Then we consider the more general case of risk measures that depend on stochastic processes describing the evolution of financial positions or cumulated cash flows. In both cases the new representations allow for a simple composition of one-step risk measures in the dual. We discuss several explicit examples and provide connections to the recently introduced class of dynamic variational preferences.

Keywords: Dynamic risk measures; time-consistency; dual representations (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (62)

Downloads: (external link)
http://www.worldscientific.com/doi/abs/10.1142/S0219024911006292
Access to full text is restricted to subscribers

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wsi:ijtafx:v:14:y:2011:i:01:n:s0219024911006292

Ordering information: This journal article can be ordered from

DOI: 10.1142/S0219024911006292

Access Statistics for this article

International Journal of Theoretical and Applied Finance (IJTAF) is currently edited by L P Hughston

More articles in International Journal of Theoretical and Applied Finance (IJTAF) from World Scientific Publishing Co. Pte. Ltd.
Bibliographic data for series maintained by Tai Tone Lim ().