Submodular Risk Allocation

• 成果类型: Article
• 署名作者: Ghamami, Samim; Glasserman, Paul
• 署名单位: University of California System; University of California Berkeley; Columbia University
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2018.3156
• 发表日期: 2019
• 页码: 4656-4675
• 关键词: financial institutions; MARKETS; RISK; correlation

摘要

We analyze the optimal allocation of trades to portfolios when the cost associated with an allocation is proportional to each portfolio's risk. Our investigation is motivated by changes in the over-the-counter derivatives markets, under which some contracts may be traded bilaterally or through central counterparties, splitting a set of trades into two or more portfolios. A derivatives dealer faces risk-based collateral and capital costs for each portfolio, and it seeks to minimize total margin requirements through its allocation of trades to portfolios. When margin requirements are submodular, the problem becomes a submodular intersection problem. Its dual provides per-trade margin attributions, and assigning trades to portfolios based on the lowest attributed costs yields an optimal allocation. As part of this investigation, we derive conditions under which standard deviation and other risk measures are submodular functions of sets of trades. We compare systemwide optimality with individually optimal allocations in a market with multiple dealers.