Related papers: Iterated risk measures for risk-sensitive Markov d…
We tackle the problem of estimating risk measures of the infinite-horizon discounted cost within a Markov cost process. The risk measures we study include variance, Value-at-Risk (VaR), and Conditional Value-at-Risk (CVaR). First, we show…
We consider a risk-sensitive optimization of consumption-utility on infinite time horizon where the one-period investment gain depends on an underlying economic state whose evolution over time is assumed to be described by a discrete-time,…
Different approaches to defining dynamic market risk measures are available in the literature. Most are focused or derived from probability theory, economic behavior or dynamic programming. Here, we propose an approach to define and…
Spectral risk measures (SRMs) are risk measures that take account of user riskaversion, but to date there has been little guidance on the choice of utility function underlying them. This paper addresses this issue by examining alternative…
This paper deals with discrete-time Markov control processes on a general state space. A long-run risk-sensitive average cost criterion is used as a performance measure. The one-step cost function is nonnegative and possibly unbounded.…
This paper investigates a novel behavioral feature of recursive preferences: aversion to risks that persist over time, or simply \textit{correlation aversion}. Greater persistence provides information about future consumption but reduces…
Evaluating the financial performance of manufacturing firms requires consideration of both the time value of money and the relative importance of multiple decision criteria. Conventional approaches relying solely on deterministic…
Most people are risk-averse (risk-seeking) when they expect to gain (lose). Based on a generalization of ``expected utility theory'' which takes this into account, we introduce an automaton mimicking the dynamics of economic operations.…
In this paper, we study a mean-variance optimization problem in an infinite horizon discrete time discounted Markov decision process (MDP). The objective is to minimize the variance of system rewards with the constraint of mean performance.…
Spectral risk measures are attractive risk measures as they allow the user to obtain risk measures that reflect their risk-aversion functions. To date there has been very little guidance on the choice of risk-aversion functions underlying…
We present a general approach to the pricing of products in finance and insurance in the multi-period setting. It is a combination of the utility indifference pricing and optimal intertemporal risk allocation. We give a characterization of…
This paper is devoted to solving a time-inconsistent risk-sensitive control problem with parameter $\e$ and its limit case ($\e\rightarrow0^+$) for countable-stated Markov decision processes (MDPs for short). Since the cost functional is…
We develop a method for computing policies in Markov decision processes with risk-sensitive measures subject to temporal logic constraints. Specifically, we use a particular risk-sensitive measure from cumulative prospect theory, which has…
We consider the problem of optimally designing a system for repeated use under uncertainty. We develop a modeling framework that integrates design and operational phases, which are represented by a mixed-integer program and discounted-cost…
We introduce a general framework for measuring risk in the context of Markov control processes with risk maps on general Borel spaces that generalize known concepts of risk measures in mathematical finance, operations research and…
In classical Markov Decision Processes (MDPs), action costs and transition probabilities are assumed to be known, although an accurate estimation of these parameters is often not possible in practice. This study addresses MDPs under cost…
We discuss equivalent axiomatic characterizations of distortion risk measures, and give a novel and concise proof of the characterization of elicitable distortion risk measures. Elicitability has recently been discussed as a desirable…
Assuming that agents' preferences satisfy first-order stochastic dominance, we show how the Expected Utility paradigm can rationalize all optimal investment choices: the optimal investment strategy in any behavioral law-invariant…
I study robust comparative statics for risk-averse subjective expected utility (SEU) maximizers. Starting with a finite menu of actions totally ordered by sensitivity to risk, I identify the transformations of her menu that lead a…
We consider a discrete-time version of the popular optimal dividend pay-out problem in risk theory. The novel aspect of our approach is that we allow for a risk averse insurer, i.e., instead of maximising the expected discounted dividends…