Risk Allocation and Risk Attribution in Static and Dynamic Settings

  • Author / Creator
    Cao, Han
  • Risk can be decomposed along two dimensions: risk allocation and risk
    attribution. On the one hand, the total risk of a company can be allocated to
    its divisions, using that the company’s profit/loss is the sum of the divisions’
    profits/losses. On the other hand, risk is attributed to risk drivers that may
    affect the company’s profit/loss in a nonlinear way. This thesis deals with
    risk allocation and risk attribution by extending results from a single-period
    model to a dynamic setting. For risk allocation, we apply the Euler allocation
    principle while for risk attribution, we use a linear approximation of the profit/
    loss contributions of risk drivers and then apply risk allocation. We also
    show an example for risk allocation and risk attribution, using the entropic
    risk measure and simulating the risk drivers in MATLAB.

  • Subjects / Keywords
  • Graduation date
    Fall 2021
  • Type of Item
  • Degree
    Master of Science
  • DOI
  • License
    This thesis is made available by the University of Alberta Libraries with permission of the copyright owner solely for non-commercial purposes. This thesis, or any portion thereof, may not otherwise be copied or reproduced without the written consent of the copyright owner, except to the extent permitted by Canadian copyright law.