Thumbnail Image
Item

Weakly time consistent concave valuations and their dual representations

Roorda,B.
; 
Schumacher,Hans
Abstract
We derive dual characterizations of two notions of weak time consistency for concave valuations, which are convex risk measures under a positive sign convention. Combined with a suitable risk aversion property, these notions are shown to amount to three simple rules for not necessarily minimal representations, describing precisely which features of a valuation determine its unique consistent update. A compatibility result shows that for a time-indexed sequence of valuations, it is sufficient to verify these rules only pairwise with respect to the initial valuation, or in discrete time, only stepwise. We conclude by describing classes of consistently risk averse dynamic valuations with prescribed static properties per time step. This gives rise to a new formalism for recursive valuation.
Description
Date
2016-01
Journal Title
Journal ISSN
Volume Title
Publisher
Collections
Tilburg University Research Output Collection
Show all metadata
Files
Thumbnail Image
Finance_Stoch_Weakly_time_consistent.pdf
Adobe PDF, 1.32 MB
Research Projects
Organizational Units
Journal Issue
Keywords
Convex risk measures, Concave valuations, Duality, Weak time consistency, Risk aversion, D81 - Criteria for Decision-Making under Risk and Uncertainty, C61 - Optimization Techniques ; Programming Models ; Dynamic Analysis, G28 - Government Policy and Regulation, G22 - Insurance ; Insurance Companies ; Actuarial Studies
Citation
Roorda, B & Schumacher, H 2016, 'Weakly time consistent concave valuations and their dual representations', Finance and Stochastics, vol. 20, no. 1, pp. 123-151. https://doi.org/10.1007/s00780-015-0285-8
URI
https://hdl.handle.net/20.500.14602/64607
Embedded videos