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DOI: 10.5445/KSP/1000058749/18

Integrated measures of household risk in financial plans optimized under a consumption rate constraint

Pietrzyk, Radoslaw; Rokita, Pawel

Abstract:
Measures of risk suited to the life-long financial plan of a household differ from other popular risk measures. When discussing a risk variable that would incorporate exposures to all significant types of risk, a natural choice for a financial institution would be value (e.g. of a portfolio), and, for enterprises, it would be, for instance, net income or cash flow. Based on these natural risk variables, integrated risk measures for financial institutions and investors are thus Value at Risk (VaR) or Expected Shortfall (ES) or related measures. For enterprises, these may be Earnings at Risk (EaR) and Cash Flow at Risk (CFaR). A measure of risk suited to the specificity of a household should, in turn, address threats to the accomplishment of its life objectives (to be more precise – life objectives of its members) and must take into account its life cycle. In this article, we present some proposals of new downside risk measures that fulfill these conditions. The measures are suited to the household financial planning framework proposed in other works by the authors of this paper and their concept is presented within this framework, bu ... mehr


Zugehörige Institution(en) am KIT Institut für Informationswirtschaft und Marketing (IISM)
Publikationstyp Zeitschriftenaufsatz
Jahr 2017
Sprache Englisch
Identifikator ISSN: 2363-9881
URN: urn:nbn:de:swb:90-770181
KITopen ID: 1000077018
Erschienen in Archives of Data Science, Series A (Online First)
Band 2
Heft 1
Seiten 16 S. online
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