Convex Risk Measure UES And Its Application In The Portfolio

Since the beginning of the 21st century, the international status of China has been improved significantly, and has begun to play an important role. But some people expressed a little bit concern behind the cheers, because the financial risk of the world is gradually entering China. In the eyes of financial professionals, financial risk management maintains an important position. In order to coincide with the international financial risk management, in what way to do scientific risk measurement has become the focus of many scholars’ research.In financial markets, financial managements, on the one hand, in order to meet the goals of maximizing the interests of investors and minimizing risks, develop a series of investment decisions, on the other hand, they actively look for the objective function of the investors. On this road, many scholars, through repeated research, finally reaped some fruit. On the basis of predecessors, the author will do some preliminary research in this area. This paper, on the basis of a brief introduction of some financial metrics tool, aims to give an in-depth summary of the risk measurement tool ES, and find the deficiencies and defects of this risk measure. In this paper, by combining investor’s subjective satisfaction of the consumer program, the author combines utility function and ES to create a new type of convex risk measurement tool UES. UES satisfies two properties:monotonicity and convexity.This article has carried on the theoretical argument with them. Through summarizing the characteristics of the utility function used, this paper lists the utility function which matches one type of investors, and draws the graphics of this utility function. At the end of this article, the empirical analysis of ES and UES has been made.After the introduction of this new method, the risk measurement management in the field of finance has taken on an entirely new look. In the portfolio application of risk measurement methods is a relatively concern topic in academia. Therefore, the portfolio application of this new method is especially valuable and of great significance.