Finance and Stochastics

, Volume 6, Issue 4, pp 429–447

Convex measures of risk and trading constraints

Authors

  • Hans Föllmer
    • Institut für Mathematik, Humboldt-Universität, Unter den Linden 6, 10099 Berlin, Germany (e-mail: {foellmer,schied}@mathematik.hu-berlin.de)
  • Alexander Schied
    • Institut für Mathematik, Humboldt-Universität, Unter den Linden 6, 10099 Berlin, Germany (e-mail: {foellmer,schied}@mathematik.hu-berlin.de)
Original Paper

DOI: 10.1007/s007800200072

Cite this article as:
Föllmer, H. & Schied, A. Finance Stochast (2002) 6: 429. doi:10.1007/s007800200072

Abstract.

We introduce the notion of a convex measure of risk, an extension of the concept of a coherent risk measure defined in Artzner et al. (1999), and we prove a corresponding extension of the representation theorem in terms of probability measures on the underlying space of scenarios. As a case study, we consider convex measures of risk defined in terms of a robust notion of bounded shortfall risk. In the context of a financial market model, it turns out that the representation theorem is closely related to the superhedging duality under convex constraints.

Key words: Risk measure, convex measure of risk, shortfall, trading constraints, efficient hedging
JEL Classification: G18, G11, C60, C61
Mathematics Subject Classification (2000): 46N10, 91B16, 91B28, 91B30

Copyright information

© Springer-Verlag Berlin Heidelberg 2002