Distortion risk measures: Prudence, coherence, and the expected shortfall

Abstract Distortion risk measures (DRM) are risk measures that are law invariant and comonotonic additive. The present paper is an extensive inquiry into this class of risk measures in light of new ideas such as qualitative robustness, prudence and no reward for concentration, and tail relevance. Results include several characterizations of prudent DRMs, a novel representation of coherent DRMs as well as an axiomatization of the Expected Shortfall alternative to the one recently provided by Wang and Zitikis. By linking the two axiomatizations, the paper provides a new perspective on the idea of no reward for concentration. The paper also contains results of independent interest such as the lower semicontinuity with respect to convergence in distribution of the Haezendonck–Goovaerts risk measures, the extension of non‐necessarily convex risk measures as well as the structure of the core of a general submodular distortion.