Related papers: Spectral Risk Measures and the Choice of Risk Aver…
Many biological, psychological and economic experiments have been designed where an organism or individual must choose between two options that have the same expected reward but differ in the variance of reward received. In this way,…
To find a trade-off between profitability and prudence, financial practitioners need to choose appropriate risk measures. Two key points are: Firstly, investors' risk attitudes under uncertainty conditions should be an important reference…
Restricting the variance of a policy's return is a popular choice in risk-averse Reinforcement Learning (RL) due to its clear mathematical definition and easy interpretability. Traditional methods directly restrict the total return…
Multivariate sign functions are often used for robust estimation and inference. We propose using data dependent weights in association with such functions. The proposed weighted sign functions retain desirable robustness properties, while…
This work provides an in-depth mathematical description of the response functions that are used for spatial and spectral analysis of X-ray data. The use of such functions is well-known to anyone familiar with the analysis of X-ray data…
In our previous paper, "A Unified Approach to Systemic Risk Measures via Acceptance Set" (\textit{Mathematical Finance, 2018}), we have introduced a general class of systemic risk measures that allow for random allocations to individual…
A statistical functional, such as the mean or the median, is called elicitable if there is a scoring function or loss function such that the correct forecast of the functional is the unique minimizer of the expected score. Such scoring…
When it comes to structural estimation of risk preferences from data on choices, random utility models have long been one of the standard research tools in economics. A recent literature has challenged these models, pointing out some…
The aim of this work consists in the study of the optimal investment strategy for a behavioural investor, whose preference towards risk is described by both a probability distortion and an S-shaped utility function. Within a continuous-time…
In this paper we introduce a generalization of classical risk measures in which the risk is represented by a step function taking two values, corresponding to two endogenously determined market regimes. This extends the traditional…
In this short paper we introduce a new class of performance measures based on certainty equivalents defined via scaled utility functions. We analyse their properties, show that the corresponding portfolio optimization problem is well-posed…
We present the Shortfall Deviation Risk (SDR), a risk measure that represents the expected loss that occurs with certain probability penalized by the dispersion of results that are worse than such an expectation. SDR combines Expected…
In many countries financial service providers have to elicit their customers risk preferences, when offering products and services. For instance, in the Netherlands pension funds will be legally obliged to factor in their clients risk…
Starting from the requirement that risk measures of financial portfolios should be based on their losses, not their gains, we define the notion of loss-based risk measure and study the properties of this class of risk measures. We…
Uncertainty is a pervasive challenge in decision and risk management and it is usually studied by quantification and modeling. Interestingly, engineers and other decision makers usually manage uncertainty with strategies such as…
By adopting a distributional viewpoint on law-invariant convex risk measures, we construct dynamics risk measures (DRMs) at the distributional level. We then apply these DRMs to investigate Markov decision processes, incorporating latent…
The control function approach allows the researcher to identify various causal effects of interest. While powerful, it requires a strong invertibility assumption in the selection process, which limits its applicability. This paper expands…
Procyclicality of historical risk measure estimation means that one tends to over-estimate future risk when present realized volatility is high and vice versa under-estimate future risk when the realized volatility is low. Out of it…
Potential Future Exposure (PFE) is a standard risk metric for managing business unit counterparty credit risk but there is debate on how it should be calculated. The debate has been whether to use one of many historical ("physical")…
Despite decades of research in risk management, most of the literature has focused on scalar risk measures (like e.g. Value-at-Risk and Expected Shortfall). While such scalar measures provide compact and tractable summaries, they provide a…