Publication:827137

DOI10.1007/S10479-019-03276-1zbMATH Open1455.91276arXiv1711.08633OpenAlexW2963264275WikidataQ127811491 ScholiaQ127811491MaRDI QIDQ827137FDOQ827137

Michel De Lara, Jean-Philippe Chancelier, Henri Gérard

Publication date: 6 January 2021

Published in: Annals of Operations Research (Search for Journal in Brave)

Abstract: You are a financial analyst. At the beginning of every week, you are able to rank every pair of stochastic processes starting from that week up to the horizon. Suppose that two processes are equal at the beginning of the week. Your ranking procedure is time consistent if the ranking does not change between this week and the next one. In this paper, we propose a minimalist definition of Time Consistency (TC) between two (assessment) mappings. With very few assumptions, we are able to prove an equivalence between Time Consistency and a Nested Formula (NF) between the two mappings. Thus, in a sense, two assessments are consistent if and only if one is factored into the other. We review the literature and observe that the various definitions of TC (or of NF) are special cases of ours, as they always include additional assumptions. By stripping off these additional assumptions, we present an overview of the literature where the contribution of each author is enlightened.

Full work available at URL: https://arxiv.org/abs/1711.08633

zbMATH Keywords

dynamic risk measuretime consistencynested formula

Mathematics Subject Classification ID

Statistical methods; risk measures (91G70)

Cites Work

• Coherent measures of risk
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• Richard Bellman on the Birth of Dynamic Programming
• Changing Tastes and Coherent Dynamic Choice
• Conditional Risk Mappings
• Rectangular Sets of Probability Measures

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