This Ph.D. thesis studies optimal risk capital allocation and optimal risk sharing. The first chapter deals with the problem of optimally allocating risk capital across divisions within a financial institution. To do so, an asymptotic approach is used to generalize the well-studied Aumann-Shapley value. Even if the Aumann-Shapley value does not exist, which is due to non-differentiability problems, this approach yields an explicit allocation rule. The second chapter involves optimal natural hedging of longevity risk among pension funds and life insurers. Lack of consensus regarding accurate pricing hampers trade. Techniques from cooperative game theory are used to characterize risk redistributions and prizes. The introduction of the Basel II regulation and the Swiss Solvency Test has increased the use of risk measures to evaluate financial or insurance risk. The third chapter deals with optimal trading if firms use risk measures to evaluate risk; both in an exchange market and in an illiquid market. Under mild conditions, there is a unique equilibrium risk redistribution. If the market is illiquid, the same risk redistribution is characterized axiomatically.
|Qualification||Doctor of Philosophy|
|Award date||15 Jan 2014|
|Place of Publication||Tilburg|
|Publication status||Published - 2014|