On the impossibility of fair risk allocation

Csóka, Péter and Pintér, Miklós (2014) On the impossibility of fair risk allocation. Working Paper. Corvinus University of Budapest Faculty of Economics, Budapest.

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Measuring and allocating risk properly are crucial for performance evaluation and internal capital allocation of portfolios held by banks, insurance companies, investment funds and other entities subject to financial risk. We show that by using coherent measures of risk it is impossible to allocate risk satisfying simultaneously the natural requirements of Core Compatibility, Equal Treatment Property and Strong Monotonicity. To obtain the result we characterize the Shapley value on the class of totally balanced games and also on the class of exact games.

Item Type:Monograph (Working Paper)
Series Name:Corvinus Economics Working Papers - CEWP
Series Number / Identification Number:2014/12
Uncontrolled Keywords:Coherent Measures of Risk, Risk Allocation Games, Totally Balanced Games, Exact Games, Shapley value, Core
JEL classification:C71 - Cooperative Games
G10 - General Financial Markets: General (includes Measurement and Data)
Subjects:Mathematics, Econometrics
Funders:János Bolyai Research Scholarship of the Hungarian Academy of Sciences
Projects:HAS LP-004/2010, OTKA PD 105859, MTA-BCE "Lendület" Strategic Interactions Research Group, OTKA K 101224
ID Code:1658
Deposited By: Ádám Hoffmann
Deposited On:25 Jul 2014 09:40
Last Modified:25 Jul 2014 11:31

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