Risk measures for processes and BSDEs
AbstractThe paper analyzes risk assessment for cash flows in continuous time using the notion of convex risk measures for processes. By combining a decomposition result for optional measures, and a dual representation of a convex risk measure for bounded \cd processes, we show that this framework provides a systematic approach to the both issues of model ambiguity, and uncertainty about the time value of money. We also establish a link between risk measures for processes and BSDEs.
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Date of creation: 17 Apr 2013
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Convex risk measures for processes; Discounting ambiguity; Model ambiguity; Cash subadditivity; Decomposition of optional measures; BSDEs;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-04-27 (All new papers)
- NEP-RMG-2013-04-27 (Risk Management)
- NEP-UPT-2013-04-27 (Utility Models & Prospect Theory)
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- Peter Carr & Travis Fisher & Johannes Ruf, 2012. "On the Hedging of Options On Exploding Exchange Rates," Papers 1202.6188, arXiv.org, revised Nov 2013.
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