Risk management under incomplete information: Exact upper and lower bounds for the probability to reach extreme values

Ann De Schepper () and Bart Heijnen

Working Papers from University of Antwerp, Faculty of Business and Economics

Abstract: A key problem in financial and actuarial research, and particularly in the field of risk management, is the choice of models so as to avoid systematic biases in the measurement of risk. An alternative consists of working with incomplete information, by fixing only a number of parameters instead of a complete distribution, which results in bounds instead of unique results. In the present contribution, we present upper and lower bounds for tail probabilities or probabilities to reach extreme values, in case the information about the underlying distribution is restricted to successive moments, and possibly the mode. Part of these results were already published earlier, but we present them here in a uniform and clear way, and we add results for the case of three moments.

Keywords: Risk management; Incomplete information; Tail probability; Extreme values (search for similar items in EconPapers)
JEL-codes: C13 C65 E40 G14 G22 (search for similar items in EconPapers)
Pages: 14 pages
Date: 2006-08
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ant:wpaper:2006019

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