Professor Jonathan Li of the Telfer School of Management has been awarded a grant from the Natural Sciences and Engineering Research Council of Canada (NSERC) for research centring on the modelling and optimization of risk measures. This work aims to develop a risk measure capable of capturing multifaceted uncertainty. Professor Li, an assistant professor at the Telfer School since 2013, holds a Ph.D. from the Mechanical and Industrial Engineering Department at the University of Toronto specializing in business analytics, operations research, and financial engineering.
More sophisticated measures of risk and uncertainty have emerged in response to deficiencies found in traditional risk measures that have led to risk underestimation. (The 2008 financial crisis offered a dramatic recent example of the far-reaching effects of underestimating risk.) New measures developed within the fields of Robust Optimization and Risk Analysis have been particularly encouraging. A significant part of these efforts has been focused on designing a class of measures that respect fundamental principles of risk management, namely convex risk measures. The theme of this research program is to develop methodologies that enable convex risk measures to be customized according to decision makers’ knowledge of risk and to be minimized subject to constraints facing each decision maker. Such a customization will provide a broader view of risk than the traditional one based on probability assumptions. This research program offers the potential to account for the uncertainties facing decision makers in a more comprehensive way, one that applies to decision-making in fields such as finance, health care and energy. The work extends professor Li’s research on the issue of model uncertainty, which arises when the mathematical model used to describe a decision problem is prone to error. Professor Li will receive a $110,000 grant from NSERC over five years.