Abstract
Let us consider a financial firm having some divisions which have invested into some risky assets. Using coherent measures of risk there is some diversification benefit that should be allocated somehow. We use cooperative game theory and simulations to assess the possibility to jointly satisfy three inherent fairness requirements for allocating risk capital in illiquid markets: Core Compatibility, Equal Treatment Property, and Strong Monotonicity. We show that practically it is not possible to allocate risk in illiquid markets satisfying the three fairness notions at the same time, one has to give up at least one of them.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
