This paper examines auditor liability rules under imperfect information, costly litigation and risk averse auditors. A negligence rule fails in such a setting, because in equilibrium auditors will deviate with positive probability from any given standard. It is shown that strict liability outperforms negligence with respect to risk allocation, and the probability that a desired level of care is...

Capital allocation principles are used in various contexts in which a risk capital or a cost of an aggregate position has to be allocated among its constituent parts. We study capital allocation principles in a performance measurement framework. We introduce the notation of suitability of allocations for performance measurement and show under different assumptions on the involved risk measures ...

This article extends the optimal covariance steering (CS) problem for linear stochastic systems subject to chance constraints so as account an allocation of risk. Previous works have assumed a uniform risk in order cast control semidefinite program, which can be solved efficiently using standar...

Analysing the Panel Study of Income Dynamics and Health Retirement Study, we investigate extent to which US households reduce their financial risk exposure when confronted with background risk. Our novel modelling approach – termed a deflated ordered fractional model quantifies how overall composition household portfolio three asset classes adjusts risk, is unique in recovering for any given ri...