Optimal derivatives design under dynamic risk measures
Barrieu, P.
& El Karoui, N.
(2004).
Optimal derivatives design under dynamic risk measures.
In
Yin, G. & Zhang, Q.
(Eds.),
Mathematics of Finance
(pp. 13-26).
American Mathematical Society.
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 |
|---|---|
| Copyright holders | © 2004 American Mathematical Society |
| Departments |
LSE > Academic Departments > Statistics LSE > Former organisational units > Centre for Analysis of Time Series |
| Date Deposited | 27 Feb 2014 |
| URI | https://researchonline.lse.ac.uk/id/eprint/55895 |
Explore Further
ORCID: https://orcid.org/0000-0001-9473-263X