EconPapers    
Economics at your fingertips  
 

Comonotonic risk measures in a world without risk-free assets

Pablo Koch-Medina, Cosimo Munari and Gregor Svindland

Papers from arXiv.org

Abstract: We study comonotonicity of risk measures in terms of the primitives of the theory: acceptance sets and eligible assets. We show that comonotonicity cannot be characterized by the properties of the acceptance set alone and heavily depends on the choice of the eligible asset. In fact, in many important cases, comonotonicity is only compatible with risk-free eligible assets. The incompatibility with risky eligible assets is systematic whenever the acceptability criterion is based on Value at Risk or any convex distortion risk measures such as Expected Shortfall. These findings show the limitations of the concept of comonotonicity in a world without risk-free assets and raise questions about the meaning and the role of comonotonicity within a capital adequacy framework. We also point out some potential traps when using comonotonicity for "discounted" capital positions.

New Economics Papers: this item is included in nep-rmg
Date: 2016-02, Revised 2017-08
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed

Downloads: (external link)
http://arxiv.org/pdf/1602.05477 Latest version (application/pdf)

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:arx:papers:1602.05477

Access Statistics for this paper

More papers in Papers from arXiv.org
Series data maintained by arXiv administrators ().

 
Page updated 2017-09-29
Handle: RePEc:arx:papers:1602.05477