A note on representation of BSDE-based dynamic risk measures and dynamic capital allocations
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In this paper, we provide a representation theorem for dynamic capital allocation under Itô-Lévy model. We consider the representation of dynamic risk measures defined under Backward Stochastic Differential Equations (BSDE) with generators that grow quadratic-exponentially in the control variables. Dynamic capital allocation is derived from the differentiability of BSDEs with jumps. The results are illustrated by deriving a capital allocation representation for dynamic entropic risk measure and static coherent risk measure.
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