Spectral Risk Measures: Properties and Limitations

Kevin Dowd, John Cotter and Ghulam Sorwar

Papers from arXiv.org

Abstract: Spectral risk measures (SRMs) are risk measures that take account of user riskaversion, but to date there has been little guidance on the choice of utility function underlying them. This paper addresses this issue by examining alternative approaches based on exponential and power utility functions. A number of problems are identified with both types of spectral risk measure. The general lesson is that users of spectral risk measures must be careful to select utility functions that fit the features of the particular problems they are dealing with, and should be especially careful when using power SRMs.

Date: 2011-03
New Economics Papers: this item is included in nep-rmg and nep-upt
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http://arxiv.org/pdf/1103.5674 Latest version (application/pdf)

Related works:
Working Paper: Spectral Risk Measures: Properties and Limitations (2010)
Journal Article: Spectral Risk Measures: Properties and Limitations (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1103.5674

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