Capital Allocation for Set-Valued Risk Measures
Electronic version of an article published as [International Journal of Theoretical and Applied Finance, Volume 23, Number 1, 2020, 16 pages] [DOI/10.1142/S0219024920500090] © [copyright World Scientific Publishing Company]
Posted: 1 Feb 2021
Date Written: February 27, 2020
We introduce the definition of set-valued capital allocation rule, in the context of set- valued risk measures. In analogy to some well known methods for the scalar case based on the idea of marginal contribution and hence on the notion of gradient and sub-gradient of a risk measure, and under some reasonable assumptions, we define some set-valued capital allocation rules relying on the representation theorems for coherent and convex set-valued risk measures and investigate their link with the notion of sub-differential for set-valued functions. We also introduce and study the set-valued analogous of some properties of classical capital allocation rules, such as the one of no undercut. Furthermore, we compare these rules with some of those mostly used for univariate (single-valued) risk measures. Examples and comparisons with the scalar case are provided at the end.
Keywords: Risk management, capital allocation rules, set-valued risk measures, coherent and convex risk measures
JEL Classification: G32
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