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Coherent Risk Measure Based on Relative Entropy |
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PP: 233-238 |
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Author(s) |
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Zheng Chengli,
Chen Yan,
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Abstract |
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| This article proposes a new coherent risk measure called iso-entropic risk measure, which is based on relative entropy under
the theory framework of Artzner et al.(1999). It is pointed that this measure is just the negative expectation of the risk portfolio position
under the probability measure through Esscher transformation. This iso-entropic risk measure is not a 0-1 risk measure and very smooth
in contrast with another important coherent risk measure AV @R (Average Value at Risk). And it is a little larger than AV @R at the
same level, namely it is has more prudence. So it maybe a better coherent risk measure.
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