Fair Estimation of Capital Risk Allocation. (arXiv:1902.10044v2 [q-fin.RM] UPDATED)
In this paper we develop a novel methodology for estimation of risk capital allocation. The methodology is rooted in the theory of risk measures. We work within a general, but tractable class of law-invariant coherent risk measures, with a particular focus on expected shortfall. We introduce the concept of fair capital allocations and provide explicit…