Mathematics Seminar: Good Risk Assessment: Thinking Coherently
4:10 pm; Neill 5W
It has been widely documented that popular risk measures, such as VaR (Value-at-Risk), underestimate extreme risk and may lead to spectacular failures in risk management. In this talk, I will discuss four coherency principles for good risk assessment, and using duality ideas (the bipolar theorem, to be more precise), I will illustrate how these four coherency principles yield general, statistically tractable expressions for accurate risk assessment. In particular, the Expected Shortfall, the most important coherent risk measure, will be discussed in detail.