On Coherent Risk Measures Induced by Convex Risk Measures |
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Authors: | Email author" target="_blank">Zhiping?ChenEmail author Qianhui?Hu |
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Institution: | 1.Department of Computing Science, School of Mathematics and Statistics,Xi’an Jiaotong University,Xi’an,People’s Republic of China |
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Abstract: | We study the close relationship between coherent risk measures and convex risk measures. Inspired by the obtained results, we propose a class of coherent risk measures induced by convex risk measures. The robust representation and minimization problem of the induced coherent risk measure are investigated. A new coherent risk measure, the Entropic Conditional Value-at-Risk (ECVaR), is proposed as a special case. We show how to apply the induced coherent risk measure to realistic portfolio selection problems. Finally, by comparing its out-of-sample performance with that of CVaR, entropic risk measure, as well as entropic value-at-risk, we carry out a series of empirical tests to demonstrate the practicality and superiority of the ECVaR measure in optimal portfolio selection. |
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