This was part of Dynamic Assessment Indices

New perspective to capital allocation rules in a dynamic setting

Emanuela Rosazza Gianin, Università degli Studi di Milano-Bicocca
Thursday, May 12, 2022

Abstract: In the theory of risk measures, capital allocation is a well-known problem consisting in sharing "ad hoc" the margin required for a position among the different sources of riskiness. Such a problem has been faced in the literature by using different approaches (depending on the nature of the risk measure behind) also in connection with systemic risk and game theory. Although there is a wide literature on the relation between dynamic risk measures and BSDEs and on capital allocation rules in a static setting, only a few recent papers on capital allocation work in a dynamic setting and, moreover, those papers mainly focus on the gradient approach. In this paper, we discuss new perspectives to the capital allocation problem going beyond those already existing in the literature. In particular, we introduce and investigate a general axiomatic approach to dynamic capital allocations as well as an approach suitable for risk measures induced by g-expectations under weaker assumptions than Gateaux differentiability. Based on a joint work with Elisa Mastrogiacomo.