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Distortion risk measures, ROC curves, and distortion divergence

Author

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  • Schumacher Johannes M.

    () (Faculty of Economics and Business, Section Quantitative Economics, University of Amsterdam, Roetersstraat 11, Amsterdam, Netherlands)

Abstract

Distortion functions are employed to define measures of risk. Receiver operating characteristic (ROC) curves are used to describe the performance of parametrized test families in testing a simple null hypothesis against a simple alternative. This paper provides a connection between distortion functions on the one hand, and ROC curves on the other. This leads to a new interpretation of some well-known classes of distortion risk measures, and to a new notion of divergence between probability measures.

Suggested Citation

  • Schumacher Johannes M., 2018. "Distortion risk measures, ROC curves, and distortion divergence," Statistics & Risk Modeling, De Gruyter, vol. 35(1-2), pages 35-50, January.
  • Handle: RePEc:bpj:strimo:v:35:y:2018:i:1-2:p:35-50:n:3
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    References listed on IDEAS

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