Cooperative Games With General Deviation Measures

Bogdan Grechuk, Anton Molyboha, Michael Zabarankin

Research output: Contribution to journalArticlepeer-review

13 Scopus citations

Abstract

Cooperative games with players using different law-invariant deviation measures as numerical representations for their attitudes towards risk in investing to a financial market are formulated and studied. As a central result, it is shown that players (investors) form a coalition (cooperative portfolio) that behaves similar to a single player (investor) with a certain deviation measure. An explicit formula for that deviation measure is obtained. An approach to optimal risk sharing among investors is developed, and a "fair" division of the cooperative portfolio expected gain, belonging to the core of a corresponding cooperative game, is suggested.

Original languageEnglish
Pages (from-to)339-365
Number of pages27
JournalMathematical Finance
Volume23
Issue number2
DOIs
StatePublished - Apr 2013

Keywords

  • Cooperative games
  • Deviation measures
  • Portfolio theory
  • Risk sharing

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