Dynamic CVAR with multi-period risk problems. (English) Zbl 1269.93137
Summary: This paper studies multi-period risk management problems by presenting a dynamic risk measure. This risk measure is the sum of conditional value-at-risk of each period. The authors model it by Markov decision processes and derive its optimality equation. This equation is further transformed equivalently to an analytically tractable one. The authors then use the model and its results to a multi-period portfolio optimization when the return rate vectors at each period form a Markov chain.
Keywords:
\(\alpha\)-conditional value at risk (CVAR); optimality equation; optimal policy; multi-period risk problems; multi-period portfolio optimization; Markov decision processesReferences:
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