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arXiv · 1808.04611

A note on representation of BSDE-based dynamic risk measures and dynamic capital allocations

Lesedi Mabitsela·Calisto Guambe·Rodwell Kufakunesu
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Abstract

In this paper, we provide a representation theorem for dynamic capital allocation under It{\^o}-L{\'e}vy model. We consider the representation of dynamic risk measures defined under Backward Stochastic Differential Equations (BSDE) with generators that grow quadratic-exponentially in the control variables. Dynamic capital allocation is derived from the differentiability of BSDEs with jumps. The results are illustrated by deriving a capital allocation representation for dynamic entropic risk measure and static coherent risk measure.

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Lesedi Mabitsela, Calisto Guambe, Rodwell Kufakunesu. 2018-08-14. A note on representation of BSDE-based dynamic risk measures and dynamic capital allocations. https://arxiv.org/abs/1808.04611

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