TY  - GEN
AB  - This paper introduces a (coherent) risk measure that describes the uncertainty of the model (represented by a probability measure $P_0$) by a set  $P_\lambda$ of probability measures each of which has a Radon-Nikodym's derivative  (with respect to $P_0$) that lies within the interval $[\lambda,\frac{1}{\lambda}]$ for some constant $\lambda\in(0,1]$. Economic considerations are discussed and an explicit representation is obtained that gives a connection to both the expected loss of the financial position and its *average value-at-risk*. Optimal portfolio analysis is performed -- different optimization criteria lead to Merton portfolio. Comparison with related problems reveals examples of extreme sensitivity of optimal portfolios to model parameters and the choice of risk measure.
DA  - 2019
KW  - Risk measure
KW  - Model uncertainty
KW  - Value at risk
KW  - Average value at risk
KW  - Optimal portfolio
KW  - Merton portfolio.
LA  - eng
PY  - 2019
SN  - 0931-6558
TI  - Locally Constant Model Uncertainty Risk Measure
UR  - https://nbn-resolving.org/urn:nbn:de:0070-pub-29337481
Y2  - 2024-11-22T13:39:48
ER  -