Robust market-adjusted systemic risk measures

TL;DR

This paper develops a dual representation for robust systemic risk measures in financial markets, accounting for market adjustments and no-reference probability, linking to no-arbitrage conditions.

Contribution

It introduces a novel dual representation for convex robust systemic risk measures that incorporate market factors without relying on a specific probability measure.

Findings

Dual representation of systemic risk measures derived

Connection established between risk measures and no-arbitrage conditions

Framework accommodates market adjustments without reference probability

Abstract

In this note we consider a system of financial institutions and study systemic risk measures in the presence of a financial market and in a robust setting, namely, where no reference probability is assigned. We obtain a dual representation for convex robust systemic risk measures adjusted to the financial market and show its relation to some appropriate no-arbitrage conditions.