Stable Allocations of Risk

Péter Csóka, P. Jean-Jacques Herings and László Kóczy ()

No 802, Working Paper Series from Óbuda University, Keleti Faculty of Business and Management

Abstract: The measurement and the allocation of risk are fundamental problems of portfolio management. Coherent measures of risk provide an axiomatic approach to the former problem. In an environment given by a coherent measure of risk and the various portfolios' realization vectors, risk allocation games aim at solving the second problem: How to distribute the diversification benefts of the various portfolios? Un- derstanding these cooperative games helps us to find stable, efficient,and fair allocations of risk. We show that the class of risk allocation and totally balanced games coincide, hence a stable allocation of risk is always possible. When the aggregate portfolio is riskless, the class of risk allocation games coincides with the class of exact games. As in exact games any subcoalition may be subject to marginalization even in core allocations, our result further emphasizes the responsibility involved in allocating risk.

Keywords: Coherent Measures of Risk; Risk Allocation Games; Totally Balanced Games; Exact Games (search for similar items in EconPapers)
JEL-codes: C71 G10 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2007-06, Revised 2008-04
New Economics Papers: this item is included in nep-gth and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Stable allocations of risk (2009)
Working Paper: Stable Allocations of Risk (2007)
Working Paper: Stable allocations of risk (2007)
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