CONVEX RISK MEASURES FOR GOOD DEAL BOUNDS

Pricing Counterparty Risk Using Good Deal Bounds∗

We develop a method for pricing counterparty risk by using good deal bounds. The method imposes a new restriction in the arbitrage free model by setting upper bounds on the Sharpe ratios of the assets. The potential prices which are eliminated represent unreasonably good deals. The constraint on the Sharpe ratio translates into a constraint on the stochastic discount factor. Thus, one can obtai...

Good Deal Bounds Induced by Shortfall Risk

We shall provide in this paper good deal pricing bounds for contingent claims induced by the shortfall risk with some loss function. Assumptions we impose on loss functions and contingent claims are very mild. We prove that the upper and lower bounds of good deal pricing bounds are expressed by convex risk measures on Orlicz hearts. In addition, we obtain its representation with the minimal pen...

Optimal Stopping for Dynamic Convex Risk Measures

We use martingale and stochastic analysis techniques to study a continuous-time optimal stopping problem in which the decision maker uses a dynamic convex risk measure to evaluate future rewards.

Convex and coherent risk measures

We discuss the quantification of financial risk in terms of monetary risk measures. Special emphasis is on dual representations of convex risk measures, relations to expected utility and other valuation concepts, conditioning, and consistency in discrete time.

Big Deal - good deal? Or is there a better deal?