Online Estimation and Optimization of Utility-Based Shortfall Risk
Abstract
Utility-Based Shortfall Risk (UBSR) is a risk metric that is increasingly popular in financial applications, owing to certain desirable properties that it enjoys. We consider the problem of estimating UBSR in a recursive setting, where samples from the underlying loss distribution are available one-at-a-time. We cast the UBSR estimation problem as a root finding problem, and propose stochastic approximation-based estimations schemes. We derive non-asymptotic bounds on the estimation error in the number of samples. We also consider the problem of UBSR optimization within a parameterized class of random variables. We propose a stochastic gradient descent based algorithm for UBSR optimization, and derive non-asymptotic bounds on its convergence.
Cite
@article{arxiv.2111.08805,
title = {Online Estimation and Optimization of Utility-Based Shortfall Risk},
author = {Vishwajit Hegde and Arvind S. Menon and L. A. Prashanth and Krishna Jagannathan},
journal= {arXiv preprint arXiv:2111.08805},
year = {2023}
}