Two Types of Risk

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Show simple item record Filar, J Kang, B
dc.contributor.editor Yan, H
dc.contributor.editor Yin, G
dc.contributor.editor Zhang, Q 2010-05-28T09:37:43Z 2006-01
dc.identifier.citation Stochastic Processes, Optimization, and Control Theory: Applications in Financial Engineering, Queue, 2006, 1, pp. 109 - 140
dc.identifier.isbn 978-0-387-33770-8
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 investors 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.
dc.publisher Springer
dc.relation.hasversion Accepted manuscript version en_US
dc.relation.isbasedon 10.1007/0-387-33815-2_7
dc.title Two Types of Risk
dc.type Chapter
dc.parent Stochastic Processes, Optimization, and Control Theory: Applications in Financial Engineering, Queue
dc.journal.number en_US
dc.publocation Germany en_US
dc.publocation Germany
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 010401 Applied Statistics
dc.for 010302 Numerical Solution of Differential and Integral Equations
dc.for 010205 Financial Mathematics
dc.personcode 101305
dc.percentage 50 en_US Financial Mathematics en_US
dc.classification.type FOR-08 en_US
dc.edition 1 en_US
dc.edition 1
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
pubs.embargo.period Not known
pubs.organisational-group /University of Technology Sydney
pubs.organisational-group /University of Technology Sydney/Faculty of Business
pubs.organisational-group /University of Technology Sydney/Faculty of Business/Finance
utslib.copyright.status Open Access 2015-04-15 12:23:47.074767+10
pubs.consider-herdc false
utslib.collection.history General (ID: 2)

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