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Article


Title

Distorted probability operator for dynamic portfolio optimization in times of socio-economic crisis

Authors

[ 1 ] Instytut Logistyki, Wydział Inżynierii Zarządzania, Politechnika Poznańska | [ P ] employee

Scientific discipline (Law 2.0)

[5.6] Management and quality studies

Year of publication

2023

Published in

Central European Journal of Operations Research

Journal year: 2023 | Journal volume: in press | Journal number: in press

Article type

scientific article

Publication language

english

Keywords
EN
  • Probability distortion
  • Markov decision processes
  • Dynamic programming
  • Risk management
  • Mathematical finance
Abstract

EN A robust optimal control of discrete time Markov chains with finite terminal T and bounded costs or wealth using probability distortion is studied. The time inconsistency of these distortion operators and hence its lack of dynamic programming are discussed. Due to that, dynamic versions of these operators are introduced, and its availability for dynamic programming is demonstrated. Based on dynamic programming algorithm, existence of the optimal policy is justified and an application of the theory to portfolio optimization along with a numerical study is also presented.

Date of online publication

09.12.2022

Pages (from - to)

in press - in press

DOI

10.1007/s10100-022-00834-0

URL

https://doi.org/10.1007/s10100-022-00834-0

Ministry points / journal

70.0

Impact Factor

2.407 [List 2021]

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