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Markov risk mappings and risk-sensitive optimal prediction

Author

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  • Tomasz Kosmala

    (Queen Mary University of London)

  • Randall Martyr

    (Queen Mary University of London)

  • John Moriarty

    (Queen Mary University of London)

Abstract

We formulate a probabilistic Markov property in discrete time under a dynamic risk framework with minimal assumptions. This is useful for recursive solutions to risk-sensitive versions of dynamic optimisation problems such as optimal prediction, where at each stage the recursion depends on the whole future. The property holds for standard measures of risk used in practice, and is formulated in several equivalent versions including a representation via acceptance sets, a strong version, and a dual representation.

Suggested Citation

  • Tomasz Kosmala & Randall Martyr & John Moriarty, 2023. "Markov risk mappings and risk-sensitive optimal prediction," Mathematical Methods of Operations Research, Springer;Gesellschaft für Operations Research (GOR);Nederlands Genootschap voor Besliskunde (NGB), vol. 97(1), pages 91-116, February.
    • Handle: RePEc:spr:mathme:v:97:y:2023:i:1:d:10.1007_s00186-022-00802-z
    DOI: 10.1007/s00186-022-00802-z
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    References listed on IDEAS

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