Risk excess measures induced by hemi-metrics

Olivier P. Faugeras; Ludger Rüschendorf

doi:10.1186/s41546-018-0032-0

Article Contents

2018, Volume 3: 6. Doi: 10.1186/s41546-018-0032-0

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Risk excess measures induced by hemi-metrics

Olivier P. Faugeras^1, , and
Ludger Rüschendorf²

1. Toulouse School of Economics-Université Toulouse 1 Capitole, Manufacture des Tabacs, 21 Allée de Brienne, 31000 Toulouse, France;
2. Abteilung für Mathematische Stochastik, Albert-Ludwigs University of Freiburg, Eckerstrasse 1, D-79104 Freiburg, Germany

Olivier P. Faugeras, olivier.faugeras@tse-fr.eu

Received: September 25, 2017

Revised: May 06, 2018

Published: September 2020

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Abstract

The main aim of this paper is to introduce the notion of risk excess measure, to analyze its properties, and to describe some basic construction methods. To compare the risk excess of one distribution Q w.r.t. a given risk distribution P, we apply the concept of hemi-metrics on the space of probability measures. This view of risk comparison has a natural basis in the extension of orderings and hemi-metrics on the underlying space to the level of probability measures. Basic examples of these kind of extensions are induced by mass transportation and by function class induced orderings. Our view towards measuring risk excess adds to the usually considered method to compare risks of Q and P by the values ρ(Q), ρ(P) of a risk measure ρ. We argue that the difference ρ(Q)-ρ(P) neglects relevant aspects of the risk excess which are adequately described by the new notion of risk excess measure. We derive various concrete classes of risk excess measures and discuss corresponding ordering and measure extension properties.

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Mathematics Subject Classification: Primary;60B05;Secondary;62P05;91B30.

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