Optimal Numeraires for Risk Measures

4 Pages Posted: 14 Mar 2007

See all articles by Damir Filipović

Damir Filipović

Ecole Polytechnique Fédérale de Lausanne; Swiss Finance Institute

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Date Written: December 21, 2006

Abstract

Can the usage of a risky numeraire with a greater than risk free expected return reduce the capital requirements in a solvency test? I will show that this is not the case. In fact, under a reasonable technical condition, there exists no optimal numeraire which yields smaller capital requirements than any other numeraire.

Keywords: Change of Numeraire, Solvency Capital Requirements

Suggested Citation

Filipovic, Damir, Optimal Numeraires for Risk Measures (December 21, 2006). Available at SSRN: https://ssrn.com/abstract=969278 or http://dx.doi.org/10.2139/ssrn.969278

Damir Filipovic (Contact Author)

Ecole Polytechnique Fédérale de Lausanne ( email )

Odyssea
Station 5
Lausanne, 1015
Switzerland

HOME PAGE: http://people.epfl.ch/damir.filipovic

Swiss Finance Institute

c/o University of Geneva
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CH-1211 Geneva 4
Switzerland

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