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Probability and Computational Finance Seminar
Birgit Rudloff
Title: Time consistency of dynamic risk measures in markets with transaction costs

Abstract: Set-valued risk measures appear naturally when markets with transaction costs are considered and capital requirements can be made in a basket of currencies or assets. Definitions of time consistency properties in the set-valued framework are given. It is shown that in the set-valued case the recursive form of multivariate risk measures as well as an additive property for the acceptance sets is equivalent to a stronger time consistency property called multi-portfolio time consistency. As examples we consider the superhedging problem in markets with proportional transaction costs and the Average Value at Risk. Furthermore, we discuss the explicit calculation of these risk measures. We will show how multi-portfolio time consistency relates to a generalized stability, respectively a generalized cocycle property in the coherent, respectively the convex case.

Date: Monday, March 25, 2013
Time: 5:00 pm
Location: Wean Hall 6423
Submitted by:  Kasper Larsen