Excess invariance and shortfall risk measures

Jeremy Staum

doi:10.1016/j.orl.2012.11.004

Excess invariance and shortfall risk measures

Jeremy Staum^*

^*Corresponding author for this work

Research output: Contribution to journal › Article › peer-review

13 Scopus citations

Abstract

This paper introduces the axiom of excess invariance for risk measures, meaning insensitivity to the amount by which a portfolio's value exceeds a benchmark. Using this axiom, the paper defines the class of shortfall risk measures. Shortfall risk measures are suitable for regulatory or risk management applications in which risk is associated with shortfall beneath a benchmark, whereas excess above the benchmark is not important.

Original language	English (US)
Pages (from-to)	47-53
Number of pages	7
Journal	Operations Research Letters
Volume	41
Issue number	1
DOIs	https://doi.org/10.1016/j.orl.2012.11.004
State	Published - Jan 2013

Keywords

Cash additive
Cash invariant
Excess-invariant
Risk measures
Shortfall
Translation invariant

ASJC Scopus subject areas

Software
Management Science and Operations Research
Industrial and Manufacturing Engineering
Applied Mathematics

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10.1016/j.orl.2012.11.004

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AB - This paper introduces the axiom of excess invariance for risk measures, meaning insensitivity to the amount by which a portfolio's value exceeds a benchmark. Using this axiom, the paper defines the class of shortfall risk measures. Shortfall risk measures are suitable for regulatory or risk management applications in which risk is associated with shortfall beneath a benchmark, whereas excess above the benchmark is not important.

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KW - Translation invariant

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Excess invariance and shortfall risk measures

Abstract

Keywords

ASJC Scopus subject areas

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