Markov decision models (MDM) used in practical applications are most often less complex than the underlying ‘true’ MDM. The reduction of model complexity is performed for several reasons. However, it is obviously of interest to know what kind of model reduction is reasonable (in regard to...

We consider a dynamic mean-risk problem, where the risk constraint is given by the Average Value–at–Risk. As financial market we choose a discrete-time binomial model which allows for explicit solutions. Problems where the risk constraint on the final wealth is replaced by intermediate risk...

We consider a dynamic mean-risk problem, where the risk constraint is given by the Average Value–at–Risk. As financial market we choose a discrete-time binomial model which allows for explicit solutions. Problems where the risk constraint on the final wealth is replaced by intermediate risk...