Liu, Peng and Tsanakas, Andreas and Wei, Yunran (2026) Risk sharing with Lambda value at risk under heterogeneous beliefs. Finance and Stochastics, 30 (4). pp. 1179-1223. DOI https://doi.org/10.1007/s00780-026-00604-9
Liu, Peng and Tsanakas, Andreas and Wei, Yunran (2026) Risk sharing with Lambda value at risk under heterogeneous beliefs. Finance and Stochastics, 30 (4). pp. 1179-1223. DOI https://doi.org/10.1007/s00780-026-00604-9
Liu, Peng and Tsanakas, Andreas and Wei, Yunran (2026) Risk sharing with Lambda value at risk under heterogeneous beliefs. Finance and Stochastics, 30 (4). pp. 1179-1223. DOI https://doi.org/10.1007/s00780-026-00604-9
Abstract
In this paper, we study the risk sharing problem among multiple agents using Lambda Value-at-Risk as their preference functional, under heterogeneous beliefs, where beliefs are represented by several probability measures. We obtain semi-explicit formulas for the inf-convolution of multiple Lambda Value-at-Risk measures under heterogeneous beliefs and the explicit forms of the corresponding optimal allocations. To show the impact of belief heterogeneity, we consider three cases: homogeneous beliefs, conditional beliefs and absolutely continuous beliefs. For those cases, we find more explicit expressions for the inf-convolution, showing the influence of the relation of the beliefs on the inf-convolution. Moreover, we consider, in a two-agent setting, the inf-convolution of one Lambda Value-at-Risk and a general risk measure, including expected utility, distortion risk measures and Lambda Value-at-Risk as special cases, with differing beliefs. The expression of the inf-convolution and the form of the optimal allocation are obtained. In all above cases we demonstrate that trivial outcomes arise when both belief inconsistency and risk tolerance are high. Finally, we discuss risk sharing for an alternative definition of Lambda Value-at-Risk.
| Item Type: | Article |
|---|---|
| Additional Information: | 36 pages |
| Uncontrolled Keywords: | CoES; CoVaR; Distortion risk measure; Expected shortfall; Inf-convolution; Lambda Value-at-Risk; Risk sharing; Value-at-Risk |
| Divisions: | Faculty of Science and Health Faculty of Science and Health > Mathematics, Statistics and Actuarial Science, School of |
| SWORD Depositor: | Unnamed user with email elements@essex.ac.uk |
| Depositing User: | Unnamed user with email elements@essex.ac.uk |
| Date Deposited: | 18 Nov 2025 10:35 |
| Last Modified: | 24 Sep 2026 06:47 |
| URI: | http://repository.essex.ac.uk/id/eprint/41882 |
Available files
Filename: Risk_sharing_with_LVaR_and_heterogeneous_beliefs_FS_style.pdf
Embargo Date: 1 January 2100