An Integrated Risk Measure and Information Theory Approach for Modeling Financial Data and Solving Decision Making Problems

In this paper we build some integrated techniques for modeling financial data and solving decision making problems, based on risk theory and information theory. Several risk measures and entropy measures are investigated and compared with respect to their analytical properties and effectiveness in solving real problems. Some criteria for portfolio selection are derived combining the classical risk measure approach with the information theory approach. We analyze the performance of the methods proposed in case of some financial applications.Computational results are provided.