This paper proposes a framework to analyze mean and distortion risk across layers forming a random loss. Layers are standard insurance and financial constructs representing insurance coverage, capital shortfall, derivative payouts and debt tranches. Layers are expressed using percentiles or...

A critical problem in risk analysis involving financial variables is the calculation of risk margins. When there are a number of risks, the total risk margin is often reduced to reflect "diversification benefits." How large should the diversification benefit be? And how should the benefit be...