Multi-asset return risk measures

Abstract: We revisit the recently introduced concept of return risk measures (RRMs) and extend it by incorporating risk management via multiple so-called eligible assets. The resulting new class of risk measures, termed multi-asset return risk measures (MARRMs), introduces a novel economic model for multiplicative risk sharing. We analyze properties of these risk measures. In particular, we prove that a positively homogeneous MARRM is quasi-convex if and only if it is convex. Furthermore, we provide conditions to avoid inconsistent risk evaluations. Then, we point out the connection between MARRMs and the well-known concept of multi-asset risk measures (MARMs). This is used to obtain various dual representations of MARRMs. Moreover, we conduct a series of case studies, in which we use typical continuous-time financial markets and different notions of acceptability of losses to compare RRMs, MARMs, and MARRMs and draw conclusions about the cost of risk mitigation.