RORAC. An insightful example shows that the implementation of classical gradient capital allocation can be suboptimal if … requirements are refined by adding a risk correction term that takes into account the interdependencies of the risks of different …

Existing risk capital allocation methods, such as the Euler rule, work under the explicit assumption that portfolios … risk. The model leads to non-homogeneous fuzzy games, for which the Euler rule is not applicable. For such games, we seek … implemented capital allocation. In contrast, the Aumann-Shapley allocation, does not generally belong to the core. For the non …

framework while still obtaining Pareto optimality. In the framework developed, the aggregate risk components of individual risks … are exchanged through a highly reduced set of nonspecific securities, while the idiosyncratic risk components are insured …