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Coherent Measures of Risk

Coherent Measures of Risk In this paper we study both market risks and nonmarket risks, without complete markets assumption, and discuss methods of measurement of these risks. We present and justify a set of four desirable properties for measures of risk, and call the measures satisfying these properties “coherent.” We examine the measures of risk provided and the related actions required by SPAN, by the SEC/NASD rules, and by quantile‐based methods. We demonstrate the universality of scenario‐based methods for providing coherent measures. We offer suggestions concerning the SEC method. We also suggest a method to repair the failure of subadditivity of quantile‐based methods. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Mathematical Finance Wiley

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References (33)

Publisher
Wiley
Copyright
Blackwell Publishers Inc 1999
ISSN
0960-1627
eISSN
1467-9965
DOI
10.1111/1467-9965.00068
Publisher site
See Article on Publisher Site

Abstract

In this paper we study both market risks and nonmarket risks, without complete markets assumption, and discuss methods of measurement of these risks. We present and justify a set of four desirable properties for measures of risk, and call the measures satisfying these properties “coherent.” We examine the measures of risk provided and the related actions required by SPAN, by the SEC/NASD rules, and by quantile‐based methods. We demonstrate the universality of scenario‐based methods for providing coherent measures. We offer suggestions concerning the SEC method. We also suggest a method to repair the failure of subadditivity of quantile‐based methods.

Journal

Mathematical FinanceWiley

Published: Jul 1, 1999

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