Monetary Risk Measures (2012.06751v1)

Abstract: In this paper, we study general monetary risk measures (without any convexity or weak convexity). A monetary (respectively, positively homogeneous) risk measure can be characterized as the lower envelope of a family of convex (respectively, coherent) risk measures. The proof does not depend on but easily leads to the classical representation theorems for convex and coherent risk measures. When the law-invariance and the SSD (second-order stochastic dominance)-consistency are involved, it is not the convexity (respectively, coherence) but the comonotonic convexity (respectively, comonotonic coherence) of risk measures that can be used for such kind of lower envelope characterizations in a unified form. The representation of a law-invariant risk measure in terms of VaR is provided.