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Uncertainty Aversion Risk Aversion And The Optimal Choice Of Portfolio
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Book Synopsis Economic and Financial Decisions under Risk by : Louis Eeckhoudt
Download or read book Economic and Financial Decisions under Risk written by Louis Eeckhoudt and published by Princeton University Press. This book was released on 2011-10-30 with total page 245 pages. Available in PDF, EPUB and Kindle. Book excerpt: An understanding of risk and how to deal with it is an essential part of modern economics. Whether liability litigation for pharmaceutical firms or an individual's having insufficient wealth to retire, risk is something that can be recognized, quantified, analyzed, treated--and incorporated into our decision-making processes. This book represents a concise summary of basic multiperiod decision-making under risk. Its detailed coverage of a broad range of topics is ideally suited for use in advanced undergraduate and introductory graduate courses either as a self-contained text, or the introductory chapters combined with a selection of later chapters can represent core reading in courses on macroeconomics, insurance, portfolio choice, or asset pricing. The authors start with the fundamentals of risk measurement and risk aversion. They then apply these concepts to insurance decisions and portfolio choice in a one-period model. After examining these decisions in their one-period setting, they devote most of the book to a multiperiod context, which adds the long-term perspective most risk management analyses require. Each chapter concludes with a discussion of the relevant literature and a set of problems. The book presents a thoroughly accessible introduction to risk, bridging the gap between the traditionally separate economics and finance literatures.
Book Synopsis Uncertainty in Economic Theory by : Itzhak Gilboa
Download or read book Uncertainty in Economic Theory written by Itzhak Gilboa and published by Psychology Press. This book was released on 2004 with total page 584 pages. Available in PDF, EPUB and Kindle. Book excerpt: "This is the first collection to include chapters on this topic, and it can thus serve as an introduction to researchers who are new to the field as well as a graduate course textbook. With this goal in mind, the book contains survey introductions that are aimed at a graduate level student, and help explain the main ideas, and put them in perspective."--BOOK JACKET.
Book Synopsis Handbook of the Fundamentals of Financial Decision Making by : Leonard C. MacLean
Download or read book Handbook of the Fundamentals of Financial Decision Making written by Leonard C. MacLean and published by World Scientific. This book was released on 2013 with total page 941 pages. Available in PDF, EPUB and Kindle. Book excerpt: This handbook in two parts covers key topics of the theory of financial decision making. Some of the papers discuss real applications or case studies as well. There are a number of new papers that have never been published before especially in Part II.Part I is concerned with Decision Making Under Uncertainty. This includes subsections on Arbitrage, Utility Theory, Risk Aversion and Static Portfolio Theory, and Stochastic Dominance. Part II is concerned with Dynamic Modeling that is the transition for static decision making to multiperiod decision making. The analysis starts with Risk Measures and then discusses Dynamic Portfolio Theory, Tactical Asset Allocation and Asset-Liability Management Using Utility and Goal Based Consumption-Investment Decision Models.A comprehensive set of problems both computational and review and mind expanding with many unsolved problems are in an accompanying problems book. The handbook plus the book of problems form a very strong set of materials for PhD and Masters courses both as the main or as supplementary text in finance theory, financial decision making and portfolio theory. For researchers, it is a valuable resource being an up to date treatment of topics in the classic books on these topics by Johnathan Ingersoll in 1988, and William Ziemba and Raymond Vickson in 1975 (updated 2 nd edition published in 2006).
Book Synopsis Handbook of the Economics of Risk and Uncertainty by : Mark Machina
Download or read book Handbook of the Economics of Risk and Uncertainty written by Mark Machina and published by Newnes. This book was released on 2013-11-14 with total page 897 pages. Available in PDF, EPUB and Kindle. Book excerpt: The need to understand the theories and applications of economic and finance risk has been clear to everyone since the financial crisis, and this collection of original essays proffers broad, high-level explanations of risk and uncertainty. The economics of risk and uncertainty is unlike most branches of economics in spanning from the individual decision-maker to the market (and indeed, social decisions), and ranging from purely theoretical analysis through individual experimentation, empirical analysis, and applied and policy decisions. It also has close and sometimes conflicting relationships with theoretical and applied statistics, and psychology. The aim of this volume is to provide an overview of diverse aspects of this field, ranging from classical and foundational work through current developments. - Presents coherent summaries of risk and uncertainty that inform major areas in economics and finance - Divides coverage between theoretical, empirical, and experimental findings - Makes the economics of risk and uncertainty accessible to scholars in fields outside economics
Book Synopsis Uncertainty in Economic Theory by : Itzhak Gilboa
Download or read book Uncertainty in Economic Theory written by Itzhak Gilboa and published by Taylor & Francis. This book was released on 2004-08-02 with total page 577 pages. Available in PDF, EPUB and Kindle. Book excerpt: This volume brings together important papers, coupled with new introductions, in the massively influential area of uncertainty in economic theory. Seminal papers are available together for the first time in book format, with new introductions and under the steely editorship of Itzhak Gilboa - this book is a useful reference tool for economists all over the globe.
Book Synopsis Prospect Theory by : Peter P. Wakker
Download or read book Prospect Theory written by Peter P. Wakker and published by Cambridge University Press. This book was released on 2010-07-22 with total page 519 pages. Available in PDF, EPUB and Kindle. Book excerpt: Prospect Theory: For Risk and Ambiguity, provides a comprehensive and accessible textbook treatment of the way decisions are made both when we have the statistical probabilities associated with uncertain future events (risk) and when we lack them (ambiguity). The book presents models, primarily prospect theory, that are both tractable and psychologically realistic. A method of presentation is chosen that makes the empirical meaning of each theoretical model completely transparent. Prospect theory has many applications in a wide variety of disciplines. The material in the book has been carefully organized to allow readers to select pathways through the book relevant to their own interests. With numerous exercises and worked examples, the book is ideally suited to the needs of students taking courses in decision theory in economics, mathematics, finance, psychology, management science, health, computer science, Bayesian statistics, and engineering.
Book Synopsis Strategic Asset Allocation by : John Y. Campbell
Download or read book Strategic Asset Allocation written by John Y. Campbell and published by OUP Oxford. This book was released on 2002-01-03 with total page 272 pages. Available in PDF, EPUB and Kindle. Book excerpt: Academic finance has had a remarkable impact on many financial services. Yet long-term investors have received curiously little guidance from academic financial economists. Mean-variance analysis, developed almost fifty years ago, has provided a basic paradigm for portfolio choice. This approach usefully emphasizes the ability of diversification to reduce risk, but it ignores several critically important factors. Most notably, the analysis is static; it assumes that investors care only about risks to wealth one period ahead. However, many investors—-both individuals and institutions such as charitable foundations or universities—-seek to finance a stream of consumption over a long lifetime. In addition, mean-variance analysis treats financial wealth in isolation from income. Long-term investors typically receive a stream of income and use it, along with financial wealth, to support their consumption. At the theoretical level, it is well understood that the solution to a long-term portfolio choice problem can be very different from the solution to a short-term problem. Long-term investors care about intertemporal shocks to investment opportunities and labor income as well as shocks to wealth itself, and they may use financial assets to hedge their intertemporal risks. This should be important in practice because there is a great deal of empirical evidence that investment opportunities—-both interest rates and risk premia on bonds and stocks—-vary through time. Yet this insight has had little influence on investment practice because it is hard to solve for optimal portfolios in intertemporal models. This book seeks to develop the intertemporal approach into an empirical paradigm that can compete with the standard mean-variance analysis. The book shows that long-term inflation-indexed bonds are the riskless asset for long-term investors, it explains the conditions under which stocks are safer assets for long-term than for short-term investors, and it shows how labor income influences portfolio choice. These results shed new light on the rules of thumb used by financial planners. The book explains recent advances in both analytical and numerical methods, and shows how they can be used to understand the portfolio choice problems of long-term investors.
Book Synopsis The Economics of Risk and Time by : Christian Gollier
Download or read book The Economics of Risk and Time written by Christian Gollier and published by MIT Press. This book was released on 2001 with total page 492 pages. Available in PDF, EPUB and Kindle. Book excerpt: Updates and advances the theory of expected utility as applied to risk analysis and financial decision making.
Book Synopsis Risk attitude & Economics by : Laura Concina
Download or read book Risk attitude & Economics written by Laura Concina and published by FonCSI. This book was released on 2014-05-01 with total page 55 pages. Available in PDF, EPUB and Kindle. Book excerpt: This document is an introduction, for non-economists, to standard and behavioral economic theories of risk and uncertainty. It describes some broadly-accepted results in economics that are determinant in decision-making under risk or uncertainty and in situations where we have to deal with losses and gains. To illustrate this point, the document presents a selection of theoretical results, ponctuated with examples taken from everyday life, and research studies in economics and psychology on the perception of risk.
Book Synopsis Uncertainty and Risk by : Mohammed Abdellaoui
Download or read book Uncertainty and Risk written by Mohammed Abdellaoui and published by Springer Science & Business Media. This book was released on 2007-08-10 with total page 299 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book tries to sort out the different meanings of uncertainty and to discover their foundations. It shows that uncertainty can be represented using various tools and mental guidelines. Coverage also examines alternative ways to deal with risk and risk attitude concepts. Behavior under uncertainty emerges from this book as something to base more on inquiry and reflection rather than on mere intuition.
Book Synopsis The Economic World View by : Uskali Mäki
Download or read book The Economic World View written by Uskali Mäki and published by Cambridge University Press. This book was released on 2001-07-23 with total page 420 pages. Available in PDF, EPUB and Kindle. Book excerpt: The beliefs of economists are not solely determined by empirical evidence in direct relation to the theories and models they hold. Economists hold 'ontological presuppositions', fundamental ideas about the nature of being which direct their thinking about economic behaviour. In this volume, leading philosophers and economists examine these hidden presuppositions, searching for a 'world view' of economics. What properties are attributed to human individuals in economic theories, and which are excluded? Does economic man exist? Do markets have an essence? Do macroeconomic aggregates exist? Is the economy a mechanism, the functioning of which is governed by a limited set of distinct causes? What are the methodological implications of different ontological starting points? This collection, which establishes economic ontology as a coordinated field of study, will be of great value to economists and philosophers of social sciences. -- Back cover.
Download or read book Rational Decisions written by Ken Binmore and published by Princeton University Press. This book was released on 2008-12-29 with total page 214 pages. Available in PDF, EPUB and Kindle. Book excerpt: It is widely held that Bayesian decision theory is the final word on how a rational person should make decisions. However, Leonard Savage--the inventor of Bayesian decision theory--argued that it would be ridiculous to use his theory outside the kind of small world in which it is always possible to "look before you leap." If taken seriously, this view makes Bayesian decision theory inappropriate for the large worlds of scientific discovery and macroeconomic enterprise. When is it correct to use Bayesian decision theory--and when does it need to be modified? Using a minimum of mathematics, Rational Decisions clearly explains the foundations of Bayesian decision theory and shows why Savage restricted the theory's application to small worlds. The book is a wide-ranging exploration of standard theories of choice and belief under risk and uncertainty. Ken Binmore discusses the various philosophical attitudes related to the nature of probability and offers resolutions to paradoxes believed to hinder further progress. In arguing that the Bayesian approach to knowledge is inadequate in a large world, Binmore proposes an extension to Bayesian decision theory--allowing the idea of a mixed strategy in game theory to be expanded to a larger set of what Binmore refers to as "muddled" strategies. Written by one of the world's leading game theorists, Rational Decisions is the touchstone for anyone needing a concise, accessible, and expert view on Bayesian decision making.
Book Synopsis Beliefs, Interactions and Preferences by : Mark J. Machina
Download or read book Beliefs, Interactions and Preferences written by Mark J. Machina and published by Springer Science & Business Media. This book was released on 2013-03-09 with total page 373 pages. Available in PDF, EPUB and Kindle. Book excerpt: Beliefs, Interactions and Preferences in Decision Making mixes a selection of papers, presented at the Eighth Foundations and Applications of Utility and Risk Theory (`FUR VIII') conference in Mons, Belgium, together with a few solicited papers from well-known authors in the field. This book addresses some of the questions that have recently emerged in the research on decision-making and risk theory. In particular, authors have modeled more and more as interactions between the individual and the environment or between different individuals the emergence of beliefs as well as the specific type of information treatment traditionally called `rationality'. This book analyzes several cases of such an interaction and derives consequences for the future of decision theory and risk theory. In the last ten years, modeling beliefs has become a specific sub-field of decision making, particularly with respect to low probability events. Rational decision making has also been generalized in order to encompass, in new ways and in more general situations than it used to be fitted to, multiple dimensions in consequences. This book deals with some of the most conspicuous of these advances. It also addresses the difficult question to incorporate several of these recent advances simultaneously into one single decision model. And it offers perspectives about the future trends of modeling such complex decision questions. The volume is organized in three main blocks: The first block is the more `traditional' one. It deals with new extensions of the existing theory, as is always demanded by scientists in the field. A second block handles specific elements in the development of interactions between individuals and their environment, as defined in the most general sense. The last block confronts real-world problems in both financial and non-financial markets and decisions, and tries to show what kind of contributions can be brought to them by the type of research reported on here.
Book Synopsis Financial Economics by : Antonio Mele
Download or read book Financial Economics written by Antonio Mele and published by MIT Press. This book was released on 2022-11-22 with total page 1147 pages. Available in PDF, EPUB and Kindle. Book excerpt: A comprehensive reference for financial economics, balancing theoretical explanations, empirical evidence, and the practical relevance of knowledge in the field. This volume offers a comprehensive, integrated treatment of financial economics, tracking the major milestones in the field and providing methodological tools. Doing so, it balances theoretical explanations, empirical evidence, and practical relevance. It illustrates nearly a century of theoretical advances with a vast array of models, showing how real phenomena (and, at times, market practice) have helped economists reformulate existing theories. Throughout, the book offers examples and solved problems that help readers understand the main lessons conveyed by the models analyzed. The book provides a unique and authoritative reference for the field of financial economics. Part I offers the foundations of the field, introducing asset evaluation, information problems in asset markets and corporate finance, and methods of statistical inference. Part II explains the main empirical facts and the challenges these pose for financial economists, which include excess price volatility, market liquidity, market dysfunctionalities, and the countercyclical behavior of market volatility. Part III covers the main instruments that protect institutions against the volatilities and uncertainties of capital markets described in part II. Doing so, it relies on models that have become the market standard, and incorporates practices that emerged from the 2007–2008 financial crisis.
Book Synopsis Theory of Decision under Uncertainty by : Itzhak Gilboa
Download or read book Theory of Decision under Uncertainty written by Itzhak Gilboa and published by Cambridge University Press. This book was released on 2009-03-16 with total page 216 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book describes the classical axiomatic theories of decision under uncertainty, as well as critiques thereof and alternative theories. It focuses on the meaning of probability, discussing some definitions and surveying their scope of applicability. The behavioral definition of subjective probability serves as a way to present the classical theories, culminating in Savage's theorem. The limitations of this result as a definition of probability lead to two directions - first, similar behavioral definitions of more general theories, such as non-additive probabilities and multiple priors, and second, cognitive derivations based on case-based techniques.
Book Synopsis Economics of Pessimism and Optimism by : Kiyohiko G. Nishimura
Download or read book Economics of Pessimism and Optimism written by Kiyohiko G. Nishimura and published by Springer. This book was released on 2017-11-13 with total page 341 pages. Available in PDF, EPUB and Kindle. Book excerpt: This is the first book to investigate individual’s pessimistic and optimistic prospects for the future and their economic consequences based on sound mathematical foundations. The book focuses on fundamental uncertainty called Knightian uncertainty, where the probability distribution governing uncertainty is unknown, and it provides the reader with methods to formulate how pessimism and optimism act in an economy in a strict and unified way. After presenting decision-theoretic foundations for prudent behaviors under Knightian uncertainty, the book applies these ideas to economic models that include portfolio inertia, indeterminacy of equilibria in the Arrow-Debreu economy and in a stochastic overlapping-generations economy, learning, dynamic asset-pricing models, search, real options, and liquidity preferences. The book then proceeds to characterizations of pessimistic (ε-contaminated) and optimistic (ε-exuberant) behaviors under Knightian uncertainty and people’s inherent pessimism (surprise aversion) and optimism (surprise loving). Those characterizations are shown to be useful in understanding several observed behaviors in the global financial crisis and in its aftermath. The book is highly recommended not only to researchers who wish to understand the mechanism of how pessimism and optimism affect economic phenomena, but also to policy makers contemplating effective economic policies whose success delicately hinges upon people’s mindsets in the market. Kiyohiko Nishimura is Professor at the National Graduate Institute for Policy Studies (GRIPS) and Professor Emeritus and Distinguished Project Research Fellow of the Center for Advanced Research in Finance at The University of Tokyo. Hiroyuki Ozaki is Professor of Economics at Keio University.
Book Synopsis Mathematical Models for Handling Partial Knowledge in Artificial Intelligence by : Giulianella Coletti
Download or read book Mathematical Models for Handling Partial Knowledge in Artificial Intelligence written by Giulianella Coletti and published by Springer Science & Business Media. This book was released on 2013-06-29 with total page 311 pages. Available in PDF, EPUB and Kindle. Book excerpt: Knowledge acquisition is one of the most important aspects influencing the quality of methods used in artificial intelligence and the reliability of expert systems. The various issues dealt with in this volume concern many different approaches to the handling of partial knowledge and to the ensuing methods for reasoning and decision making under uncertainty, as applied to problems in artificial intelligence. The volume is composed of the invited and contributed papers presented at the Workshop on Mathematical Models for Handling Partial Knowledge in Artificial Intelligence, held at the Ettore Majorana Center for Scientific Culture of Erice (Sicily, Italy) on June 19-25, 1994, in the framework of the International School of Mathematics "G.Stampacchia". It includes also a transcription of the roundtable held during the workshop to promote discussions on fundamental issues, since in the choice of invited speakers we have tried to maintain a balance between the various schools of knowl edge and uncertainty modeling. Choquet expected utility models are discussed in the paper by Alain Chateauneuf: they allow the separation of perception of uncertainty or risk from the valuation of outcomes, and can be of help in decision mak ing. Petr Hajek shows that reasoning in fuzzy logic may be put on a strict logical (formal) basis, so contributing to our understanding of what fuzzy logic is and what one is doing when applying fuzzy reasoning.
