A note on representation of BSDE-based dynamic risk measures and dynamic capital allocations

Lesedi Mabitsela, Calisto Guambe and Rodwell Kufakunesu

Papers from arXiv.org

Abstract: In this paper, we provide a representation theorem for dynamic capital allocation under It{\^o}-L{\'e}vy model. We consider the representation of dynamic risk measures defined under Backward Stochastic Differential Equations (BSDE) with generators that grow quadratic-exponentially in the control variables. Dynamic capital allocation is derived from the differentiability of BSDEs with jumps. The results are illustrated by deriving a capital allocation representation for dynamic entropic risk measure and static coherent risk measure.

Date: 2018-08
New Economics Papers: this item is included in nep-rmg
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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1808.04611

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