Related papers: Spectral Risk Measures and the Choice of Risk Aver…
We propose a novel approach to infer investors' risk preferences from their portfolio choices, and then use the implied risk preferences to measure the efficiency of investment portfolios. We analyze a dataset spanning a period of six…
We study Spectral Measures of Risk from the perspective of portfolio optimization. We derive exact results which extend to general Spectral Measures M_phi the Pflug--Rockafellar--Uryasev methodology for the minimization of alpha--Expected…
Shortfall systemic (multivariate) risk measures $\rho$ defined through an $N$-dimensional multivariate utility function $U$ and random allocations can be represented as classical (one dimensional) shortfall risk measures associated to an…
We study submodularity for law-invariant functionals, with particular attention to convex risk measures. Expected losses are modular, and certainty equivalents are submodular exactly when the loss function is convex. Law-invariant coherent…
Flexibility options, such as demand response, energy storage and interconnection, have the potential to reduce variation in electricity prices between different future scenarios, therefore reducing investment risk. Moreover, investment in…
We provide a constructive way of defining new elicitable risk measures that are characterised by a multiplicative scoring function. We show that depending on the choice of the scoring function's components, the resulting risk measure…
The policy gradients of the expected return objective can react slowly to rare rewards. Yet, in some cases agents may wish to emphasize the low or high returns regardless of their probability. Borrowing from the economics and control…
An investor's risk aversion is assumed to tend to infinity. In a fairly general setting, we present conditions ensuring that the respective utility indifference prices of a given contingent claim converge to its super replication price.
The present paper introduces a theoretical framework through which the degree of risk aversion with respect to uncertain prices can be measured through the context of the indirect utility function (IUF) using a lab experiment. First, the…
Uncertainty is prevalent in engineering design, data-driven problems, and decision making broadly. Due to inherent risk-averseness and ambiguity about assumptions, it is common to address uncertainty by formulating and solving conservative…
Spectral risk objectives - also called $L$-risks - allow for learning systems to interpolate between optimizing average-case performance (as in empirical risk minimization) and worst-case performance on a task. We develop stochastic…
We address the statistical estimation of composite functionals which may be nonlinear in the probability measure. Our study is motivated by the need to estimate coherent measures of risk, which become increasingly popular in finance,…
This paper is devoted to the introduction and study of a new family of multivariate elicitable risk measures. We call the obtained vector-valued measures multivariate expectiles. We present the different approaches used to construct our…
The risk of a financial position is usually summarized by a risk measure. As this risk measure has to be estimated from historical data, it is important to be able to verify and compare competing estimation procedures. In statistical…
This paper presents a method for incorporating risk aversion into existing decision tree models used in economic evaluations. The method involves applying a probability weighting function based on rank dependent utility theory to reduced…
Risk aversion and insurance are two prominent and interconnected concepts in economics and finance. To explore their fundamental connection, we introduce risk-insurance parity, which associates various classes of insurance contracts with…
In this paper, we study properties of certain risk measures associated with acceptance sets. These sets describe regulatory preconditions that have to be fulfilled by financial institutions to pass a given acceptance test. If the financial…
This article focuses on the work of O. Chanel and G. Chichilnisky (2013) on the flaws of expected utility theory while assessing the value of life. Expected utility is a fundamental tool in decision theory. However, it does not fit with the…
Risk-averse reinforcement learning finds application in various high-stakes fields. Unlike classical reinforcement learning, which aims to maximize expected returns, risk-averse agents choose policies that minimize risk, occasionally…
We provide an economic interpretation of the practice consisting in incorporating risk measures as constraints in a classic expected return maximization problem. For what we call the infimum of expectations class of risk measures, we show…