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Rogue traders versus value-at-risk and expected shortfall

Research output: Contribution to specialist publicationArticle

Original languageEnglish
JournalRisk Magazine
PublishedApr 2018

King's Authors

Abstract

We show that, in a Black and Scholes market, value at risk and ex-
pected shortfall are irrelevant in limiting traders excessive tail-risk seeking
behaviour as modelled via Kahneman and Tversky's S-shaped utility. To
have eective constraints one can introduce a risk limit based on a second
but concave utility function.

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