What is a Coherent Risk Measure
What is a Coherent Risk Measure?
Expert
A risk measure is coherent when it satisfies certain easy, mathematical properties. One of these properties, that some popular measures do not possess, is subadditivity, which adding together two risky portfolios cannot raise the measure of risk.
Company A is a AAA-rated firm wanting to issue five-year FRNs. It determines that it can issue FRNs at six-month LIBOR + 1/8 percent or at the six-month Treasury-bill rate + ½ percent. Specified its asset structure, LIBOR is the preferred index. Comp
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