Abstract:
The work continues author’s investigations connected with correctness conditions ascertained previously for families of risk-preferences functions (r.p.f.) that might be used in financial markets in problems of optimization on continuous VaR-criterion (CC-VaR). These conditions were used in analyzing an example of families deduced from the super-family of piecewise-linear functions by pure analytical means. Numerical methods of checking the correctness of r.p.f.-families that are useful when difficulties arise in analytical investigations are suggested. These methods are based on discrete algorithms of optimization under CC-VaR for scenario markets and solve correctness problems with quite high-degree approximation. Methods are tested on the former super-family and applied to the super-family of the generalized circles. Results demonstrate adequacy and generality of methodology.
Keywords:continuous VaR-criterion, Newman-Pearson procedure, risk-preferences functions (r.p.f.), families and super-families of r.p.f., yield, correct families, volatility.
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Received: February 20, 2019 Published: July 31, 2019
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