Time consistency is a property in financial risk related to dynamic risk measures. The purpose of the time consistent property is to categorize the risk measures which satisfy the condition that if portfolio (A) is more risky than portfolio (B) at some time in the future, then it is guaranteed to be more risky at any time prior to that point. This is an important property since if it were not to hold then there is an event (with probability of occurring greater than 0) such that B is riskier than A at time although it is certain that A is riskier than B at time . As the name suggests a time inconsistent risk measure can lead to inconsistent behavior in financial risk management.
Read more about Time Consistency: Construction, Continuous Time
Famous quotes containing the words time and/or consistency:
“It is because the public are a mass—inert, obtuse, and passive—that they need to be shaken up from time to time so that we can tell from their bear-like grunts where they are—and also where they stand. They are pretty harmless, in spite of their numbers, because they are fighting against intelligence.”
—Alfred Jarry (1873–1907)
“People who love only once in their lives are ... shallow people. What they call their loyalty, and their fidelity, I call either the lethargy of custom or their lack of imagination. Faithfulness is to the emotional life what consistency is to the life of the intellect—simply a confession of failures.”
—Oscar Wilde (1854–1900)