DEVELOPMENT OF A MORE APPLIED VERSION OF COHERENCY CALLED SENSIBLE COHERENCY FOR ASSESSMENT OF FINANCIAL RISK MEASURES

M. Jasemi, A.M. Kimiagari, A. Memariani

Abstract


ENGLISH ABSTRACT: Coherency is becoming a necessary feature for any risk measure, and now is an acceptable tool in risk management to assess the risk measures. For example, recent studies have strongly criticised VaR-based models for not providing a coherent risk measure. Because of such acceptance, it is important to improve the efficiency of the touchstone for evaluating risk measures in order to achieve a fairer assessment. This is just the challenge that this paper seeks to address. This goal is achieved on the one hand by doing some simplifications in axioms of coherency without losing their major financial points, and on the other hand by removing the paradox between two of the axioms. The new concept is called sensible coherency, and the risk measure that satisfies the four new simplified and corrected axioms will be sensibly coherent. Finally, the new axioms are applied to a particular type of lower partial moments as a case study.

AFRIKAANSE OPSOMMING: Koherensie word n noodsaaklike kenmerk van enige risikomaatstaf en is nou n aanvaarbare gereedskapstuk in die beoordeling van risikomaatstawwe. Die doel van hierdie artikel word bereik deur enersyds die aksiomas van koherensie te vereenvoudig en andersyds die paradoks tussen die aksiomas te verwyder. Die resultaat word sinvolle koherensie genoem.


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DOI: https://doi.org/10.7166/21-1-74

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