Joint ICTP/SISSA Statistical physics seminar:
"The instability of coherent risk measures"
Starts 17 Jun 2008 12:00
Ends 17 Jun 2008 20:00
Central European Time
Leonardo da Vinci Building Seminar Room
Strada Costiera, 11
I - 34151 Trieste (Italy)
It is shown that the axioms for coherent risk measures imply that whenever a dominant portfolio can be formed on a given sample (which happens with finite probability even for large samples), then portfolio optimization cannot be performed under any coherent measure on that sample, and the risk measure diverges to minus infinity. This instability was first discovered on the special example of Expected Shortfall which is used here both as an illustration and as a springboard for generalization.
ICTP - Strada Costiera, 11
I - 34151 Trieste Italy (+39) 040 2240 111 email@example.com