Two Types of Risk

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Show simple item record Filar, Jerzy en_US Kang, Boda en_US
dc.contributor.editor Yan, H; Yin, G; Zhang, Q. en_US 2010-05-28T09:37:43Z 2010-05-28T09:37:43Z 2006 en_US
dc.identifier 2008003764 en_US
dc.identifier.citation Filar Jerzy and Kang Boda 2006, 'Two Types of Risk', in (ed.), Springer, Germany, pp. 109-140. en_US
dc.identifier.issn 978-0-387-33770-8 en_US
dc.identifier.other B1UNSUBMIT en_US
dc.description.abstract The risk encountered in many environmental problems appears to exhibit special ?two-sided? characteristics. For instance, in a given area and in a given period, farmers do not want to see too much or too little rainfall. They hope for rainfall that is in some given interval. We formulate and solve this problem with the help of a ?two-sided loss function? that depends on the above range. Even in financial portfolio optimization a loss and a gain are ?two sides of a coin?, so it is desirable to deal with them in a manner that reflects an investor?s relative concern. Consequently, in this paper, we define Type I risk: ?the loss is too big? and Type II risk: ?the gain is too small?. Ideally, we would want to minimize the two risks simultaneously. However, this may be impossible and hence we try to balance these two kinds of risk. Namely, we tolerate certain amount of one risk when minimizing the other. The latter problem is formulated as a suitable optimization problem and illustrated with a numerical example. en_US
dc.language en_US
dc.publisher Springer en_US
dc.relation.hasversion Accepted manuscript version en_US
dc.relation.isbasedon en_US
dc.rights The original publication is available at en_US
dc.title Two Types of Risk en_US
dc.parent Stochastic Processes, Optimization, and Control Theory: Applications in Financial Engineering, Queue en_US
dc.journal.volume en_US
dc.journal.number en_US
dc.publocation Germany en_US
dc.identifier.startpage 109 en_US
dc.identifier.endpage 140 en_US BUS.School of Finance and Economics en_US
dc.conference Verified OK en_US
dc.for 010205 en_US
dc.personcode 0000032949 en_US
dc.personcode 101305 en_US
dc.percentage 50 en_US Financial Mathematics en_US
dc.classification.type FOR-08 en_US
dc.edition 1 en_US
dc.custom en_US en_US
dc.location.activity en_US
dc.description.keywords Two-sided risk - rainfall - temperature - value-at-risk - conditional value-at-risk - Type I risk - value-of-gain - conditional value-of-gain - Type II risk - assurance - scenarios - portfolio optimization en_US
dc.staffid 101305 en_US

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