Risk capital allocation by coherent risk measures based on one-sided moments

This paper proposes differentiability properties for positively homogeneous risk measures which ensure that the gradient can be applied for reasonable risk capital allocation on non-trivial portfolios. It is shown that these properties are fulfilled for a wide class of coherent risk measures based on the mean and the one-sided moments of a risky payoff. In contrast to quantile-based risk measures like Value-at-Risk (VaR), this class allows allocation in portfolios of very general distributions, e.g. discrete ones. Two examples show how risk capital given by the VaR can be allocated by adapting risk measures of this class to the VaR. (C) 2002 Elsevier Science B.V. All rights reserved.