COHERENT RISK MEASUREMENT
Abstract
In the world of finance, risk management refers to the practice of identifying potential risks in advance, analyzing them, and taking precautionary steps to reduce/curb the risk. When an entity makes an investment decision, it is exposed to many financial risks. The purpose of this paper is to test whether any of the five risk measurements: (1) alpha, (2) beta, (3) standard deviation, (4) Sharpe ratio, and (5) Treynor Ratio are coherent. The results show that none of the five risk measurements are coherent.
Keywords
Full Text:
PDFReferences
Artzner, P., Delbaen, F., Eber, J.-M., & Heath, D. (1999). Coherent Measures of Risk. Mathematical Finance, 9(3), 203–228. https://doi.org/10.1111/1467-9965.00068 Capital.com. (2020, September 20). Coherent risk measure definition. https://capital.com/coherent-risk-measure-definition
Chen, Z., & Hu, Q. (2018). On Coherent Risk Measures Induced by Convex Risk Measures. Methodology and Computing in Applied Probability, 20(2), 673–698. https://doi.org/10.1007/s11009-017-9584-1
Jensen, M. C. (1968). The Performance of Mutual Funds in the Period 1945-1964. The Journal of Finance, 29.
Lesnevski, V., Nelson, B. L., & Staum, J. (2020). Simulation of Coherent Risk Measures Based on Generalized Scenarios. 15.
Shepheard-Walwyn, T., & Litterman, R. (1998). Building a Coherent Risk Measurement and Capital Optimisation Model for Financial Firms. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.1029756
Times, T. E. (2020, September 20). What is Risk Management? Definition of Risk Management, Risk Management Meaning. The Economic Times. https://economictimes.indiatimes.com/definition/risk-management
Yang, H., & Siu, T. K. (2001). Coherent Risk Measures For Derivatives Under Black–Scholes Economy. International Journal of Theoretical and Applied Finance, 04(05), 819–835. https://doi.org/10.1142/S0219024901001267
Refbacks
- There are currently no refbacks.
Fakultas Ekonomi dan Bisnis | Universitas Pelita Harapan | Kampus Universitas Pelita Harapan | Gedung F Lt. 12 | Lippo Karawaci, Tangerang - 15811 | Telp 021-5460901 | Fax 54210992