Risk management under weighted limited expected loss
研究了在加权有限期望损失约束下的最优资产配置问题，发现该约束使投资者选择波动更小的投资组合，相比有限期望损失约束提供了更稳健的风险管理框架，并拓展到不完全市场。
We present and solve an optimal asset allocation problem under a weighted limited expected loss (WLEL) constraint. This formulation encompasses the risk management problem with a limited expected loss (LEL) constraint as a specialized instance and offers a pertinent internal risk management instrument for firms. We observe that a WLEL constraint makes the optimizing investor pursue less volatile payoffs than the unconstrained Merton solution. Compared to the LEL-constrained problem with the same weighted default threshold, the WLEL optimal terminal wealth displays a less dispersed distribution with a smaller variance, suggesting a more secure risk management framework. Conducting a comprehensive equilibrium analysis in the presence of a WLEL risk manager, we validate the relatively conservative investment approach undertaken by the WLEL manager. Subsequently, we expand our findings to encompass broader incomplete market settings, wherein the uniqueness of the equivalent local martingale measure is not assured.