Exponential Spectral Risk Measures

16 Pages Posted: 10 Jul 2007

See all articles by John Cotter

John Cotter

University College Dublin; UCLA Anderson School of Management

Kevin Dowd

Nottingham University Business School (NUBS)

Date Written: 2007

Abstract

Spectral risk measures are attractive risk measures as they allow the user to obtain risk measures that reflect their subjective risk-aversion. This paper examines spectral risk measures based on an exponential utility function, and finds that these risk measures have nice intuitive properties. It also discusses how they can be estimated using numerical quadrature methods, and how confidence intervals for them can be estimated using a parametric bootstrap. Illustrative results suggest that estimated exponential spectral risk measures obtained using such methods are quite precise in the presence of normally distributed losses.

Keywords: spectral risk measures, risk aversion functions, exponential utility

JEL Classification: G15

Suggested Citation

Cotter, John and Dowd, Kevin, Exponential Spectral Risk Measures (2007). Available at SSRN: https://ssrn.com/abstract=998456 or http://dx.doi.org/10.2139/ssrn.998456

John Cotter

University College Dublin ( email )

School of Business, Carysfort Avenue
Blackrock, Co. Dublin
Ireland
353 1 716 8900 (Phone)
353 1 283 5482 (Fax)

HOME PAGE: http://www.ucd.ie/bankingfinance/staff/professorjohncotter/

UCLA Anderson School of Management ( email )

110 Westwood Plaza
Los Angeles, CA 90095-1481
United States

Kevin Dowd (Contact Author)

Nottingham University Business School (NUBS) ( email )

Jubilee Campus
Wollaton Road
Nottingham, NG8 1BB
United Kingdom

Register to save articles to
your library

Register

Paper statistics

Downloads
215
rank
135,685
Abstract Views
1,205
PlumX Metrics