Conditional and Dynamic Convex Risk Measures
AbstractWe extend the definition of a convex risk measure to a conditional framework where additional information is available. We characterize these risk measures through the associated acceptance sets and prove a representation result in terms of conditional expectations. As an example we consider the class of conditional entropic risk measures. A new regularity property of conditional risk measures is defined and discussed. Finally we introduce the concept of a dynamic convex risk measure as a family of successive conditional convex risk measures and characterize those satisfying some natural time consistency properties.
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Bibliographic InfoPaper provided by Sonderforschungsbereich 649, Humboldt University, Berlin, Germany in its series SFB 649 Discussion Papers with number SFB649DP2005-006.
Length: 23 pages
Date of creation: Feb 2005
Date of revision:
Conditional convex risk measure; robust representation; regularity; entropic risk measure; dynamic convex risk measure; time consistency;
Find related papers by JEL classification:
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
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