Asymptotically Stable Dynamic Risk Assessments

15 Pages Posted: 30 Mar 2013

See all articles by Karl-Theodor Eisele

Karl-Theodor Eisele

University of Strasbourg

Michael Kupper

Humboldt University of Berlin - Department of Mathematics

Date Written: March 28, 2013

Abstract

In this paper asymptotically stable risk assessments are studied. They are characterized by not being sensitive with respect to huge additional capital in the very far future. Under the additional hypothesis of being locally continuous from below, these risk assessments are exactly those which allow a robust representation with so-called local test probabilities having a support with finite time horizon.

Time-consistent risk assessments can be constructed by composing a sequence of generators. We give several conditions for the generators such that the resulting risk assessments are indeed asymptotically stable.

Keywords: asymptotic stability of risk assessments, construction by generators, local test probabilities, robust representation, time-consistency

JEL Classification: G35, B30, B16

Suggested Citation

Eisele, Karl-Theodor and Kupper, Michael, Asymptotically Stable Dynamic Risk Assessments (March 28, 2013). Available at SSRN: https://ssrn.com/abstract=2241055 or http://dx.doi.org/10.2139/ssrn.2241055

Karl-Theodor Eisele (Contact Author)

University of Strasbourg ( email )

61, avenue de la foret noire
Strasbourg, Alsace 3000
France

Michael Kupper

Humboldt University of Berlin - Department of Mathematics ( email )

Unter den Linden
Berlin, D-10099
Germany

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