OPTIMAL NUMERAIRES FOR RISK MEASURES

Author: Filipović, Damir

Source: Mathematical Finance, Volume 18, Number 2, April 2008 , pp. 333-336(4)

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Abstract:

Can the usage of a risky numeraire with a greater than risk free expected return reduce the capital requirements in a solvency test? I will show that this is not the case. In fact, under a reasonable technical condition, there exists no optimal numeraire which yields smaller capital requirements than any other numeraire.

Keywords: numeraire; risk measure; solvency capital requirement

Document Type: Research article

DOI: http://dx.doi.org/10.1111/j.1467-9965.2007.00336.x

Affiliations: 1: Vienna Institute of Finance, University of Vienna and Vienna University of Economics and Business Administration, Austria

Publication date: 2008-04-01