Dynamic Coherent Acceptability Indices and their Applications to Finance

Tomasz R. Bielecki, Igor Cialenco and Zhao Zhang

Papers from arXiv.org

Abstract: In this paper we present a theoretical framework for studying coherent acceptability indices in a dynamic setup. We study dynamic coherent acceptability indices and dynamic coherent risk measures, and we establish a duality between them. We derive a representation theorem for dynamic coherent risk measures in terms of so called dynamically consistent sequence of sets of probability measures. Based on these results, we give a specific construction of dynamic coherent acceptability indices. We also provide examples of dynamic coherent acceptability indices, both abstract and also some that generalize selected classical financial measures of portfolio performance.

Date: 2010-10, Revised 2011-05
New Economics Papers: this item is included in nep-rmg
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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1010.4339

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