TY - JOUR

T1 - Multi-portfolio time consistency for set-valued convex and coherent risk measures

AU - Feinstein, Zachary

AU - Rudloff, Birgit

PY - 2015

Y1 - 2015

N2 - Equivalent characterizations of multiportfolio time consistency are deduced for closed convex and coherent set-valued risk measures on L^p(Ω,F,P;R^d) with image space in the power set of L^p(Ω,F ,P;R^d). In the convex case, multiportfolio time consistency is equivalent to a cocycle condition on the sum of minimal penalty functions. In the coherent case, multiportfolio time consistency is equivalent to a generalized version of stability of the dual variables. As examples, the set-valued entropic risk measure with constant risk aversion coefficient is shown to satisfy the cocycle condition for its minimal penalty functions, the set of superhedging portfolios in markets with proportional transaction costs is shown to have the stability property and in markets with convex transaction costs is shown to satisfy the composed cocycle condition, and a multiportfolio time consistent version of the set-valued average value at risk, the composed AV@R, is given and its dual representation deduced.

AB - Equivalent characterizations of multiportfolio time consistency are deduced for closed convex and coherent set-valued risk measures on L^p(Ω,F,P;R^d) with image space in the power set of L^p(Ω,F ,P;R^d). In the convex case, multiportfolio time consistency is equivalent to a cocycle condition on the sum of minimal penalty functions. In the coherent case, multiportfolio time consistency is equivalent to a generalized version of stability of the dual variables. As examples, the set-valued entropic risk measure with constant risk aversion coefficient is shown to satisfy the cocycle condition for its minimal penalty functions, the set of superhedging portfolios in markets with proportional transaction costs is shown to have the stability property and in markets with convex transaction costs is shown to satisfy the composed cocycle condition, and a multiportfolio time consistent version of the set-valued average value at risk, the composed AV@R, is given and its dual representation deduced.

UR - http://arxiv.org/pdf/1212.5563.pdf

U2 - 10.1007/s00780-014-0247-6

DO - 10.1007/s00780-014-0247-6

M3 - Journal article

VL - 19

SP - 67

EP - 107

JO - Finance and Stochastics

JF - Finance and Stochastics

SN - 0949-2984

IS - 1

ER -