Loss-based risk measures

Abstract Starting from the requirement that risk of financial portfolios should be measured in terms of their losses, not their gains, we define the notion of loss-based risk measure and study the properties of this class of risk measures. We characterize convex loss-based risk measures by a representation theorem and give examples of such risk measures. We then discuss the statistical robustness of the risk estimators associated with the family of loss-based risk measures: we provide a general criterion for the qualitative robustness of the risk estimators and compare this criterion with a sensitivity analysis of estimators based on influence functions. We find that the risk estimators associated with convex loss-based risk measures are not robust.