Access

You are not currently logged in.

Access your personal account or get JSTOR access through your library or other institution:

login

Log in to your personal account or through your institution.

Simulation of Coherent Risk Measures Based on Generalized Scenarios

Vadim Lesnevski, Barry L. Nelson and Jeremy Staum
Management Science
Vol. 53, No. 11 (Nov., 2007), pp. 1756-1769
Published by: INFORMS
Stable URL: http://www.jstor.org/stable/20122332
Page Count: 14
  • Download ($30.00)
  • Cite this Item
Simulation of Coherent Risk Measures Based on Generalized Scenarios
Preview not available

Abstract

In financial risk management, coherent risk measures have been proposed as a way to avoid undesirable properties of measures such as value at risk that discourage diversification and do not account for the magnitude of the largest, and therefore most serious, losses. A coherent risk measure equals the maximum expected loss under several different probability measures, and these measures are analogous to "populations" or "systems" in the ranking-and-selection literature. However, unlike in ranking and selection, here it is the value of the maximum expectation under any of the probability measures, and not the identity of the probability measure that attains it, that is of interest. We propose procedures to form fixed-width, simulation-based confidence intervals for the maximum of several expectations, explore their correctness and computational efficiency, and illustrate them on risk-management problems. The availability of efficient algorithms for computing coherent risk measures will encourage their use for improved risk management.

Page Thumbnails

  • Thumbnail: Page 
1756
    1756
  • Thumbnail: Page 
1757
    1757
  • Thumbnail: Page 
1758
    1758
  • Thumbnail: Page 
1759
    1759
  • Thumbnail: Page 
1760
    1760
  • Thumbnail: Page 
1761
    1761
  • Thumbnail: Page 
1762
    1762
  • Thumbnail: Page 
1763
    1763
  • Thumbnail: Page 
1764
    1764
  • Thumbnail: Page 
1765
    1765
  • Thumbnail: Page 
1766
    1766
  • Thumbnail: Page 
1767
    1767
  • Thumbnail: Page 
1768
    1768
  • Thumbnail: Page 
1769
    1769