The Foster-Hart Measure of Riskiness for General Gambles

Tobias Hellmann () and Frank Riedel

VfS Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order from Verein für Socialpolitik / German Economic Association

Abstract: Foster and Hart proposed an operational measure of riskiness for discrete random variables. We show that their defining equation has no solution for many common continuous distributions. We show how to extend consistently the definition of riskiness to continuous random variables. For many continuous random variables, the risk measure is equal to the worst-case risk measure, i.e. the maximal possible loss incurred by that gamble. We also extend the Foster-Hart risk measure to dynamic environments for general distributions and probability spaces, and we show that the extended measure avoids bankruptcy in infinitely repeated gambles.

JEL-codes: D80 D81 G11 (search for similar items in EconPapers)
Date: 2013
New Economics Papers: this item is included in nep-rmg
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: The Foster-Hart measure of riskiness for general gambles (2015)
Working Paper: The Foster-Hart measure of riskiness for general gambles (2014)
Working Paper: The Foster-Hart Measure of Riskiness for General Gambles (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc13:79752

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