This article is cited in 1 paper

Diversification and its links with risk measures

D. O. Jakovenko, M. A. Tselishchev

M. V. Lomonosov Moscow State University, Faculty of Computational Mathematics and Cybernetics

Abstract: A new approach is proposed to the concept of diversification of investment portfolios which is defined as a binary relationship in the set of portfolios with finite first moments. It is shown that this relationship is, in some sense, a partial ordering. Important properties of such a definition are considered as well as necessary and sufficient condition of the comparability of portfolios, based on the coherent risk measure Expected Shortfall. As an example, an interpretation of the diversification of information risks is presented.

Keywords: diversification; investment portfolios; comparison of portfolios; coherent risk measure; Expected Shortfall; information risk.