Distorted probability operator for dynamic portfolio optimization in times of socio-economic crisis
Uğurlu K. Brzeczek T.
December 2023Springer Science and Business Media Deutschland GmbH
Central European Journal of Operations Research
2023#31Issue 41043 - 1060 pp.
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.
Dynamic programming , Markov decision processes , Mathematical finance , Probability distortion , Risk management
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Department of Mathematics, Nazarbayev University, Astana, Kazakhstan
Engineering Management Department, Poznan University of Technology, Poznan, Poland
Department of Mathematics
Engineering Management Department
10 лет помогаем публиковать статьи Международный издатель
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