Journal article
Risk tomography
European journal of operational research, v 265(1)
16 Feb 2018
Featured in Collection : UN Sustainable Development Goals @ Drexel
Abstract
•This paper proposes to represent a random vector by a vector of random polar coordinates.•A new class of multivariate risk measures (Directional Conditional Value-at-Risk).•Properties and calculation of the proposed risk measures.•Applications to agricultural industry and portfolio optimization problem.•Comparison with its univariate counterpart, Conditional Value-at-Risk (CVaR).
New multivariate risk measures are introduced, suitable for optimal management of multidimensional assets. Risk is measured along lines through a given reference point in a multidimensional Euclidean space, and then maximum (minimum in financial planning) or mixture is taken with respect to lines lying in cones. We use VaR and CVaR as univariate risk measures but the construction allows for the use any of them. In some case numéraire is used to value the assets. Some of the new measures enjoy the coherence property for sums and also for composition, where assets are put together to form higher dimensional vectors. Numerical calculations of them are tractable as shown for certain multivariate distributions. Applications are presented for the agricultural industry using USDA database, as well as a financial portfolio problem using recent US stock market data.
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Details
- Title
- Risk tomography
- Creators
- András Prékopa - RUTCOR (Center for Operations Research), Rutgers University, Piscataway, NJ 08854, United StatesJinwook Lee - Decision Sciences and MIS, LeBow College of Business, Drexel University, Philadelphia, PA 19104, United States
- Publication Details
- European journal of operational research, v 265(1)
- Publisher
- Elsevier
- Resource Type
- Journal article
- Language
- English
- Academic Unit
- Decision Sciences (and Management Information Systems)
- Web of Science ID
- WOS:000415775300012
- Scopus ID
- 2-s2.0-85027102633
- Other Identifier
- 991019169005804721
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- Collaboration types
- Domestic collaboration
- Web of Science research areas
- Management
- Operations Research & Management Science