Dynamic risk measure
Okay, so let's talk about something called "dynamic risk measure." Imagine you're playing a game, and you want to make sure you don't lose too much money. You might think about how risky your bets are and how much you're willing to lose. That's risk management!
Now, let's say you're playing this game over time, and things are changing. Your bets might become riskier or less risky, and your willingness to lose money might change too. That's where dynamic risk comes in. It's like a way of adjusting your risk management as things change over time.
So, let's use an example to help explain this. Imagine you're buying stocks in a company. You might want to think about how likely it is that the company will make profits, and how much you're willing to risk if they don't. That's your risk measure.
But as time goes on, things might change. Maybe the company starts doing really well and making lots of profits! Yay! That means your risk of losing money goes down. Or maybe the company starts doing really poorly and losing money. That means your risk of losing money goes up.
That's where dynamic risk measure comes in. It's like a way to adjust your risk management based on how things are changing over time. Maybe you'll adjust how much money you're willing to lose, or maybe you'll adjust how risky your bets are. That way, you can keep playing the game and trying to make money while also making sure you don't lose too much.
Does that make sense, little one? Remember, when you're playing any game with money, it's important to be smart and careful with your risks!
Now, let's say you're playing this game over time, and things are changing. Your bets might become riskier or less risky, and your willingness to lose money might change too. That's where dynamic risk comes in. It's like a way of adjusting your risk management as things change over time.
So, let's use an example to help explain this. Imagine you're buying stocks in a company. You might want to think about how likely it is that the company will make profits, and how much you're willing to risk if they don't. That's your risk measure.
But as time goes on, things might change. Maybe the company starts doing really well and making lots of profits! Yay! That means your risk of losing money goes down. Or maybe the company starts doing really poorly and losing money. That means your risk of losing money goes up.
That's where dynamic risk measure comes in. It's like a way to adjust your risk management based on how things are changing over time. Maybe you'll adjust how much money you're willing to lose, or maybe you'll adjust how risky your bets are. That way, you can keep playing the game and trying to make money while also making sure you don't lose too much.
Does that make sense, little one? Remember, when you're playing any game with money, it's important to be smart and careful with your risks!