arXiv (Cornell University) · 2013 · 93 citations · 10 references
BusinessDecision SciencesDecision TheoryOptimizationStochastic ProcessesExploration-exploitation TradeoffReinforcement LearningReinforcement Learning FoundationsRisk AversionRisk PreferencesStochastic OptimizationBandit AlgorithmsExploration - Exploitation Trade-offExploration-exploitation Trade-offMulti-armed Bandit OptimizationRegret OptimizationRisk-return Trade-offsStochastic Bandits
Stochastic multi‑armed bandits solve the exploration‑exploitation dilemma and maximize expected reward, but in many practical problems maximizing expected reward is not the most desirable objective. In this paper, we introduce a novel setting based on the principle of risk‑aversion where the objective is to compete against the arm with the best risk‑return trade‑off. This setting is intrinsically more difficult than the standard multi‑arm bandit setting due to an exploration risk that introduces regret associated with algorithm variability, and we address it by using variance as a risk measure to develop two new algorithms. We investigate their theoretical guarantees and report preliminary empirical results.
Stochastic multi-armed bandits solve the Exploration-Exploitation dilemma and ultimately maximize the expected reward. Nonetheless, in many practical problems, maximizing the expected reward is not the most desirable objective. In this paper, we introduce a novel setting based on the principle of risk-aversion where the objective is to compete against the arm with the best risk-return trade-off. This setting proves to be intrinsically more difficult than the standard multi-arm bandit setting due in part to an exploration risk which introduces a regret associated to the variability of an algorithm. Using variance as a measure of risk, we introduce two new algorithms, investigate their theoretical guarantees, and report preliminary empirical results.
10
Philippe Artzner, Freddy Delbaen, Jean‐Marc Eber et al. · Mathematical Finance · 1999 · 9K citations · Full text
Business, Finance, Risk Management +14
Theory of Games and Economic Behavior
E. N., John von Neumann, Oskar Morgenstern · The Journal of Philosophy · 1945 · 4.1K citations