Coherent risk measures and uniform integrability

Muqiao Huang and Ruodu Wang

Papers from arXiv.org

Abstract: We establish a profound connection between coherent risk measures, a prominent object in quantitative finance, and uniform integrability, a fundamental concept in probability theory. Instead of working with absolute values of random variables, which is convenient in studying integrability, we work directly with random loses and gains, which have clear financial interpretation. We introduce a technical tool called the folding score of distortion risk measures. The analysis of the folding score allows us to convert some conditions on absolute values to those on gains and losses. As our main results, we obtain three sets of equivalent conditions for uniform integrability. In particular, a set is uniformly integrable if and only if one can find a coherent distortion risk measure that is bounded on the set, but not finite on $L^1$.

Date: 2024-04, Revised 2024-10
New Economics Papers: this item is included in nep-inv
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://arxiv.org/pdf/2404.03783 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:2404.03783

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().