This paper makes the point on a well known property of capital allocation rules, namely the one called no-undercut. Its desirability in capital allocation stems from some stability game theoretical features that are related to the notion of core, both for finite and infinite games. We review these aspects, by relating them to the properties of the risk measures that are involved in capital allocation problems. We also discuss some problems and possible extensions that arise when we deal with non-coherent risk measures.
Canna, G., Centrone, F., Rosazza Gianin, E. (2021). Capital allocation rules and the no-undercut property. MATHEMATICS, 9(2), 1-13 [10.3390/math9020175].
Capital allocation rules and the no-undercut property
Canna G.;Rosazza Gianin E.
2021
Abstract
This paper makes the point on a well known property of capital allocation rules, namely the one called no-undercut. Its desirability in capital allocation stems from some stability game theoretical features that are related to the notion of core, both for finite and infinite games. We review these aspects, by relating them to the properties of the risk measures that are involved in capital allocation problems. We also discuss some problems and possible extensions that arise when we deal with non-coherent risk measures.
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