Abstract

In this work, we show that the entropic value at risk (EVaR), which is not a dynamic risk measure in general, can be a finitely-valued dynamic risk measure for at least one scenario. Specifically, for any distribution where the moment generating function (mgf) exists, then there exists a confidence parameter such that EVaR can be a finitely-valued dynamic risk measure. This separates EVaR from other risk measures, such as the value at risk (VaR), which may not be a finitely-valued dynamic risk for any allowable constant confidence parameter value. This result is not unique to EVaR, as we also show that there exists a confidence parameter such that the average value at risk (AVaR)–which does not require the mgf to exist–is also a finite dynamic risk measure. The main focus of this work is EVaR as it has a stronger stochastic ordering guarantee than AVaR. Future work will examine whether EVaR can be a dynamic risk measure for any other cases.

Original languageEnglish (US)
Title of host publicationAIAA Scitech 2019 Forum
PublisherAmerican Institute of Aeronautics and Astronautics Inc, AIAA
ISBN (Print)9781624105784
DOIs
StatePublished - 2019
EventAIAA Scitech Forum, 2019 - San Diego, United States
Duration: Jan 7 2019Jan 11 2019

Publication series

NameAIAA Scitech 2019 Forum

Conference

ConferenceAIAA Scitech Forum, 2019
CountryUnited States
CitySan Diego
Period1/7/191/11/19

ASJC Scopus subject areas

  • Aerospace Engineering

Cite this

Axelrod, A., & Chowdhary, G. (2019). A dynamic risk form of entropic value at risk. In AIAA Scitech 2019 Forum (AIAA Scitech 2019 Forum). American Institute of Aeronautics and Astronautics Inc, AIAA. https://doi.org/10.2514/6.2019-0392