Imperial College London
Alternate

ProfessorDamianoBrigo

Faculty of Natural Sciences, Department of Mathematics

Chair in Mathematical Finance
 
 
 
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Contact

 

damiano.brigo CV

 
 
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Location

 

805Weeks BuildingSouth Kensington Campus

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Summary

 

Publications

Citation

BibTex format

@article{Armstrong:2022:10.1016/j.jbankfin.2021.106315,
author = {Armstrong, J and Brigo, D},
doi = {10.1016/j.jbankfin.2021.106315},
journal = {Journal of Banking & Finance},
title = {Coherent risk measures alone are ineffective in constraining portfolio losses},
url = {http://dx.doi.org/10.1016/j.jbankfin.2021.106315},
volume = {140},
year = {2022}
}
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RIS format (EndNote, RefMan)

TY  - JOUR
AB  - We show that coherent risk measures alone are ineffective in curbing the behaviour of investors withlimited liability or excessive tail-risk seeking behaviour if the market admits statistical arbitrage opportunities which we term ρ-arbitrage for a risk measure ρ. We show how to determine analytically whethersuch ρ-arbitrage portfolios exist in complete markets and in the Markowitz model. We also consider realistic numerical examples of incomplete markets and determine whether Expected-Shortfall arbitrageexists in these markets. We find that the answer depends heavily upon the probability model selected bythe risk manager but that it is certainly possible for expected shortfall constraints to be ineffective in realistic markets. Since value at risk constraints are weaker than expected shortfall constraints, our resultscan be applied to value at risk.
AU  - Armstrong,J
AU  - Brigo,D
DO  - 10.1016/j.jbankfin.2021.106315
PY  - 2022///
SN  - 0378-4266
TI  - Coherent risk measures alone are ineffective in constraining portfolio losses
T2  - Journal of Banking & Finance
UR  - http://dx.doi.org/10.1016/j.jbankfin.2021.106315
UR  - https://www.sciencedirect.com/science/article/pii/S0378426621002673?via%3Dihub
UR  - http://hdl.handle.net/10044/1/91696
VL  - 140
ER  -
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