Certainty equivalent measures of risk

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• 作者：Alexander Vinel ; Pavlo A. Krokhmal
• 关键词：Coherent measures of risk ; Convex measures of risk ; Stochastic optimization ; Risk ; averse preferences ; Utility theory ; Log ; exponential convex measures of risk
• 刊名：Annals of Operations Research
• 出版年：2017
• 出版时间：February 2017
• 年：2017
• 卷：249
• 期：1-2
• 页码：75-95
• 全文大小：
• 刊物类别：Business and Economics
• 刊物主题：Operation Research/Decision Theory; Combinatorics; Theory of Computation;
• 出版者：Springer US
• ISSN：1572-9338
• 卷排序：249

文摘

We study a framework for constructing coherent and convex measures of risk that is inspired by infimal convolution operator, and which is shown to constitute a new general representation of these classes of risk functions. We then discuss how this scheme may be effectively applied to obtain a class of certainty equivalent measures of risk that can directly incorporate preferences of a rational decision maker as expressed by a utility function. This approach is consequently employed to introduce a new family of measures, the log-exponential convex measures of risk. Conducted numerical experiments show that this family can be a useful tool for modeling of risk-averse preferences in decision making problems with heavy-tailed distributions of uncertain parameters.