Building up time-consistency for risk measures and dynamic optimization

Michel De Lara and Vincent Leclère

European Journal of Operational Research, 2016, vol. 249, issue 1, 177-187

Abstract: In stochastic optimal control, one deals with sequential decision-making under uncertainty; with dynamic risk measures, one assesses stochastic processes (costs) as time goes on and information accumulates. Under the same vocable of time-consistency (or dynamic-consistency), both theories coin two different notions: the latter is consistency between successive evaluations of a stochastic processes by a dynamic risk measure (a form of monotonicity); the former is consistency between solutions to intertemporal stochastic optimization problems. Interestingly, both notions meet in their use of dynamic programming, or nested, equations.

Keywords: Dynamic programming; Time-consistency; Dynamic risk measures (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:249:y:2016:i:1:p:177-187

DOI: 10.1016/j.ejor.2015.03.046

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