Distortion risk measure

ID: distortion-risk-measure

The Distortion Risk Measure is a concept used in risk management and finance to evaluate the risk of a given portfolio or investment by applying a distortion function to the probability distribution of potential outcomes. Unlike traditional risk measures, which might focus solely on moments like the mean or variance of returns, distortion risk measures apply a transformation to the probability distribution to emphasize certain tail risks or to reflect an individual's or institution's risk preferences.

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