On Risk-Sensitive Decision Making Under Uncertainty
Optimization and Control
2026-01-07 v1 Systems and Control
Systems and Control
Computational Finance
Methodology
Abstract
This paper studies a risk-sensitive decision-making problem under uncertainty. It considers a decision-making process that unfolds over a fixed number of stages, in which a decision-maker chooses among multiple alternatives, some of which are deterministic and others are stochastic. The decision-maker's cumulative value is updated at each stage, reflecting the outcomes of the chosen alternatives. After formulating this as a stochastic control problem, we delineate the necessary optimality conditions for it. Two illustrative examples from optimal betting and inventory management are provided to support our theory.
Cite
@article{arxiv.2404.13371,
title = {On Risk-Sensitive Decision Making Under Uncertainty},
author = {Chung-Han Hsieh and Yi-Shan Wong},
journal= {arXiv preprint arXiv:2404.13371},
year = {2026}
}
Comments
submitted for possible publication