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Beyond cash-additive risk measures : when changing the numéraire fails
Farkas, Walter; Koch Medina, Pablo; Munari, Cosimo - 2013
We discuss risk measures representing the minimum amount of capital a financial institution needs to raise and invest in a pre-specified eligible asset to ensure it is adequately capitalized. Most of the literature has focused on cash-additive risk measures, for which the eligible asset is a...
Persistent link: https://www.econbiz.de/10010258580
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Shortfall Deviation Risk : An Alternative for Risk Measurement
Righi, Marcelo - 2016
protection in risk measurement compared with VaR and ES, especially in times of significant turbulence in riskier scenarios …
Persistent link: https://www.econbiz.de/10013005534
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Impact of Risk : An Alternative Credit Risk Measure Based on Expected Credit Losses for Business Steering and Model Backtesting
Reitgruber, Wolfgang - 2015
A practically oriented, top-down approach to assessing the quality of EL by backtesting with a properly defined risk measure is introduced. In a first step, the concept of risk expenses ("Cost of Risk") has to be extended beyond the classical provisioning view, toward a more adequate capital...
Persistent link: https://www.econbiz.de/10013018343
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Expected Loss and Impact of Risk : Backtesting Parameter-Based Expected Loss in a Basel II Framework
Reitgruber, Wolfgang - 2015
The dependency structure of credit risk parameters is a key driver for capital consumption and receives regulatory and scientific attention. The impact of parameter imperfections on the quality of expected loss (EL) in the sense of a fair, unbiased estimate of risk expenses, however, is barely...
Persistent link: https://www.econbiz.de/10013018615
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Can a regulatory risk measure induce profit-maximizing risk capital allocations? The case of Conditional Tail Expectation
Mohammed, Nawaf; Furman, Edward; Su, Jianxi - 2021
Risk capital allocations (RCAs) are an important tool in quantitative risk management, where they are utilized to, e.g., gauge the profitability of distinct business units, determine the price of a new product, and conduct the marginal economic capital analysis. Nevertheless, the notion of RCA...
Persistent link: https://www.econbiz.de/10013238894
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Intrinsic risk measures
Farkas, Walter; Smirnow, Alexander - 2016 - First version: October 26, 2016
Monetary risk measures classify a financial position by the minimal amount of external capital that must be added to the position to make it acceptable.We propose a new concept: intrinsic risk measures. The definition via external capital is avoided and only internal resources appear. An...
Persistent link: https://www.econbiz.de/10011620033
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Worst-case Risk Measures of Stop-Loss and Limited Loss Random Variables Under Distribution Uncertainty With Applications to Robust Reinsurance
Cai, Jun; Liu, Fangda; Yin, Mingren - 2023
Stop-loss and limited loss random variables are two important transforms of a loss random variable and appear in many modelling problems in insurance, finance, and other fields. Risk levels of a loss variable and its transforms are often measured by risk measures. When only partial information...
Persistent link: https://www.econbiz.de/10014355245
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Risk Measures Based on Behavioral Certainty Equivalents
Symann, Paul - 2022
This paper proves that the (negative) certainty equivalent (CE) in reference-dependent decision theories (such as Prospect Theory) always satisfies the well-known axiomatic characterisation of a monetary risk measure, although in rational Expected Utility Theory this only holds in special cases....
Persistent link: https://www.econbiz.de/10013405991
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Coherent Risk Measure and Normal Mixture Distributions with Application in Portfolio Optimization and Risk Allocation
Shi, Xiang - 2015
This paper investigates the coherent risk measure of normal mixture distributions. The main result shows that the mean-risk portfolio optimization problem of some widely-used normal mixture distributions can be reduced to a quadratic programming problem which has closed form of solution by...
Persistent link: https://www.econbiz.de/10013030659
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Value-at-Risk vs. Expected Shortfall : Beware of the Aggregation Currency!
Antal, Peter - 2014
This note highlights the impact of changing the aggregation currency when testing for capital adequacy. This is … corresponding capital adequacy test -- critically depends on the aggregation currency. This is in contrast to Value-at-Risk, whose … sign is independent of the chosen aggregation currency. This implies that due caution is needed when using Expected …
Persistent link: https://www.econbiz.de/10013053687