Fair estimation of capital risk allocation

  title={Fair estimation of capital risk allocation},
  author={Tomasz R. Bielecki and Igor Cialenco and Marcin Pitera and Thorsten Schmidt},
  journal={Statistics \& Risk Modeling},
  pages={1 - 24}
Abstract In this paper, we develop a novel methodology for estimation of risk capital allocation. The methodology is rooted in the theory of risk measures. We work within a general, but tractable class of law-invariant coherent risk measures, with a particular focus on expected shortfall. We introduce the concept of fair capital allocations and provide explicit formulae for fair capital allocations in case when the constituents of the risky portfolio are jointly normally distributed. The main… Expand
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