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Spectral risk measures : properties and limitations
Author(s)
Date Issued
2008-04-18
Date Available
2009-06-15T15:32:54Z
Abstract
Spectral risk measures (SRMs) are risk measures that take account of user risk aversion, but to date there has been little guidance on the choice of utility function
underlying them. This paper addresses this issue by examining alternative approaches based on exponential and power utility functions. A number of problems are identified with both types of spectral risk measure. The general lesson is that users of spectral risk measures must be careful to select utility functions that fit the features of the particular problems they are dealing with, and should be especially careful when using power SRMs.
Sponsorship
Economic and Social Research Council; University College Dublin. School of Business
Type of Material
Working Paper
Publisher
University College Dublin. School of Business. Centre for Financial Markets
University College Dublin. School of Business
Series
Centre for Financial Markets working paper series
WP-08-05
UCD Business Schools Working Paper Series
WP08/14
Copyright (Published Version)
2008, Centre for Financial Markets
Subject – LCSH
Risk--Econometric models
Utility theory--Mathematical models
Language
English
Status of Item
Not peer reviewed
This item is made available under a Creative Commons License
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