Risk sharing for capital requirements with multidimensional security markets

Liebrich, Felix-Benedikt and Svindland, Gregor (2019): Risk sharing for capital requirements with multidimensional security markets. In: Finance and Stochastics, Vol. 23, No. 4: pp. 925-973

Abstract

We consider the risk sharing problem for capital requirements induced by capital adequacy tests and security markets. The agents involved in the sharing procedure may be heterogeneous in that they apply varying capital adequacy tests and have access to different security markets. We discuss conditions under which there exists a representative agent. Thereafter, we study two frameworks of capital adequacy more closely, namely polyhedral constraints and distribution-based constraints. We prove existence of optimal risk allocations and equilibria within these frameworks and elaborate on their robustness.

• Item Type: Journal article
• Faculties: Mathematics, Computer Science and Statistics > Mathematics > Workgroup Financial Mathematics
• Subjects: 500 Science > 510 Mathematics
• ISSN: 0949-2984
• Language: English