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      Department of Systems Engineering and Engineering Management

                             The Chinese University of Hong Kong

 

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Title:  Risk aversion in monetary risk measures 

 

 

Speaker: Ruodu Wang, University of Waterloo

 

 

Abstract: 

We incorporate a notion of risk aversion favouring prudent decisions from financial institutions into the concept of monetary risk measures. The notion of risk aversion that we focus on has four equivalent formulations: through consistency with second-order stochastic dominance, or with conditional expectations, or with portfolio diversification, and finally through expected social impact. The class of monetary risk measures representing this notion of risk aversion is referred to as consistent risk measures. We characterize the class of consistent risk measures by establishing an Expected Shortfall-based representation. The results obtained suggest that for the determination of regulatory capital, every regulator in favour of risk-averse financial decisions is essentially using a combination of Expected Shortfalls up to some adjustments. This reveals important advantages of the Expected Shortfall for prudent regulation as compared to the Value-at-Risk, a topic very much under discussion in Basel III.

 

 

Bio:

Dr. Ruodu Wang is currently Assistant Professor of Actuarial Science at the University of Waterloo in Canada. He received his Ph.D. in Mathematics from the Georgia Institute of Technology in USA. His research interest lies mainly in Quantitative Risk Management, with particular focus on risk measurement, dependence modelling, model uncertainty and risk aggregation. He has published over 30 papers in leading academic journals in related fields, including the Annals of Applied Probability, the Annals of Statistics, Statistical Science, Mathematics of Operations Research, Mathematical Finance and Finance and Stochastics. His research is currently funded by the Natural Sciences and Engineering Research Council of Canada.

 

 

This seminar is hosted by Prof. Lingfei Li.

 

 

Venue: Room 513,

      William M.W. Mong Engineering Building (ERB),

      (Engineering Building Complex Phase 2)

      The Chinese University of Hong Kong.