Concentration bounds for CVaR estimation: The cases of light-tailed and heavy-tailed distributions

Part of Proceedings of the International Conference on Machine Learning 1 pre-proceedings (ICML 2020)

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Prashanth L.A., Krishna Jagannathan, Ravi Kolla


<p>Conditional Value-at-Risk (CVaR) is a widely used risk metric in applications such as finance. We derive concentration bounds for CVaR estimates, considering separately the cases of sub-Gaussian, light-tailed and heavy-tailed distributions. For the sub-Gaussian and light-tailed cases, we use a classical CVaR estimator based on the empirical distribution constructed from the samples. For heavy-tailed random variables, we assume a mild `bounded moment' condition, and derive a concentration bound for a truncation-based estimator. Our concentration bounds exhibit exponential decay in the sample size, and are tighter than those available in the literature for the above distribution classes. To demonstrate the applicability of our concentration results, we consider the CVaR optimization problem in a multi-armed bandit setting. Specifically, we address (i) the best CVaR-arm identification problem under a fixed budget; and (ii) CVaR-based regret minimization. Using our CVaR concentration bounds, we derive an upper-bound on the probability of incorrect identification for (i), and a regret guarantee for (ii).</p>