Spectral risk measure

A Spectral risk measure is a risk measure given as a weighted average of outcomes where bad outcomes are, typically, included with larger weights. A spectral risk measure is a function of portfolio returns and outputs the amount of the numeraire (typically a currency) to be kept in reserve. A spectral risk measure is always a coherent risk measure, but the converse does not always hold. An advantage of spectral measures is the way in which they can be related to risk aversion, and particularly to a utility function, through the weights given to the possible portfolio returns.[1]

  1. ^ Cotter, John; Dowd, Kevin (December 2006). "Extreme spectral risk measures: An application to futures clearinghouse margin requirements". Journal of Banking & Finance. 30 (12): 3469–3485. arXiv:1103.5653. doi:10.1016/j.jbankfin.2006.01.008.