Optimal derivatives design under dynamic risk measures
Barrieu, Pauline
; and El Karoui, Nicole
(2004)
Optimal derivatives design under dynamic risk measures.
In:
Mathematics of Finance.
Contemporary mathematics
(351).
American Mathematical Society, Providence, USA, pp. 13-26.
ISBN 9780821834121
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 | Chapter |
|---|---|
| Departments |
Statistics Centre for Analysis of Time Series |
| Date Deposited | 27 Feb 2014 12:41 |
| URI | https://researchonline.lse.ac.uk/id/eprint/55895 |
ORCID: https://orcid.org/0000-0001-9473-263X