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Optimal derivatives design under dynamic risk measures

Barrieu, Pauline and El Karoui, Nicole (2004) Optimal derivatives design under dynamic risk measures. In: Yin, George and Zhang, Qing, (eds.) Mathematics of Finance. Contemporary mathematics (351). American Mathematical Society, Providence, USA, pp. 13-26. ISBN 9780821834121

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Abstract

We develop a methodology to optimally design a financial issue to hedge non-tradable risk on financial markets. Economic agents assess their risk using monetary risk measure. The inf-convolution of convex risk measures is the key transformation in solving this optimization problem. When agents' risk measures only di#er from a risk aversion coe#cient, the optimal risk transfer is amazingly equal to a proportion of the initial risk.

Item Type: Book Section
Official URL: http://www.ams.org/publications/ebooks/ebooks
Additional Information: © 2004 American Mathematical Society
Divisions: Statistics
Centre for Analysis of Time Series
Subjects: Q Science > QA Mathematics
Date Deposited: 27 Feb 2014 12:41
Last Modified: 15 Sep 2023 09:10
URI: http://eprints.lse.ac.uk/id/eprint/55895

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