On the coherence of Expected Shortfall

Expected Shortfall (ES) in several variants has been proposed as remedy for the defi-ciencies of Value-at-Risk (VaR) which in general is not a coherent risk measure. In fact, most definitions of ES lead to the same results when applied to continuous loss distributions. Differences may appear when the underlying loss distributions have discontinuities. In this case even the coherence property of ES can get lost unless one took care of the details in its definition. We compare some of the definitions of Expected Shortfall, pointing out that there is one which is robust in the sense of yielding a coherent risk measure regardless of the underlying distributions. Moreover, this Expected Shortfall can be estimated effectively even in cases where the usual estimators for VaR fail. Key words: Expected Shortfall; Risk measure; worst conditional expectation; tail con-ditional expectation; value-at-risk (VaR); conditional value-at-risk (CVaR); tail mean; co-herence; quantile; sub-additivity.Comment: 18 pages, LaTeX + pdfLaTeX, appendix adde

Expected Shortfall: a natural coherent alternative to Value at Risk

We discuss the coherence properties of Expected Shortfall (ES) as a financial risk measure. This statistic arises in a natural way from the estimation of the "average of the 100p % worst losses" in a sample of returns to a portfolio. Here p is some fixed confidence level. We also compare several alternative representations of ES which turn out to be more appropriate for certain purposes.Comment: to be published on "Wilmott Magazine" (http://www.wilmott.com

Minimality via second variation for a nonlocal isoperimetric problem

We discuss the local minimality of certain configurations for a nonlocal isoperimetric problem used to model microphase separation in diblock copolymer melts. We show that critical configurations with positive second variation are local minimizers of the nonlocal area functional and, in fact, satisfy a quantitative isoperimetric inequality with respect to sets that are $L^1$-close. The link with local minimizers for the diffuse-interface Ohta-Kawasaki energy is also discussed. As a byproduct of the quantitative estimate, we get new results concerning periodic local minimizers of the area functional and a proof, via second variation, of the sharp quantitative isoperimetric inequality in the standard Euclidean case. As a further application, we address the global and local minimality of certain lamellar configurations.Comment: 35 page