We introduce and study the main properties of a class of convex risk measures that refine Expected Shortfall by simultaneously controlling the expected losses associated with different portions of the tail distribution. The corresponding adjusted Expected Shortfalls quantify risk as the minimum...

We propose a simplified approach to mean-variance portfolio problems by changing their parametrisation from trading strategies to final positions. This allows us to treat, under a very mild no-arbitrage-type assumption, a whole range of quadratic optimisation problems by simple mathematical...

We show that the optimal asset allocation for an investor depends crucially on the theory with which the investor is modeled. For the same market data and the same client data different theories lead to different portfolios. The market data we consider is standard asset allocation data. The...

The replicating portfolio (RP) approach to the calculation of capital for life insurance portfolios is an industry standard. The RP is obtained from projecting the terminal loss of discounted asset-liability cash flows on a set of factors generated by a family of financial instruments that can...

We compare asset allocations that are derived for cumulative prospect theory (CPT) based on two different methods: maximizing CPT along the mean {variance efficient frontier and maximizing CPT without this restriction. We find that with normally distributed returns, the difference between these...

We live in a ‘zero-risk society', characterized by a culture that is obsessed with controlling and removing any possible risks. Obviously, one of the fundamental objectives of any civilization is to improve the safety and security of its citizens. However, we should not let the cozy comfort...