Choosing a random distribution with prescribed risks Articles uri icon

publication date

  • May 2013

start page

  • 599

end page

  • 605

issue

  • 3

volume

  • 52

international standard serial number (ISSN)

  • 0167-6687

electronic international standard serial number (EISSN)

  • 1873-5959

abstract

  • We describe several simulation algorithms that yield random probability distributions with given values of risk measures. In case of vanilla risk measures, the algorithms involve combining and transforming random cumulative distribution functions or random Lorenz curves obtained by simulating rather general random probability distributions on the unit interval. A new algorithm based on the simulation of a weighted barycentres array is suggested to generate random probability distributions with a given value of the spectral risk measure.

keywords

  • risk measure; random probability distribution; simulation; lorenz curve