Related papers: Risk Aversion and Catastrophic Risks: the Pill Exp…
For obtaining causal inferences that are objective, and therefore have the best chance of revealing scientific truths, carefully designed and executed randomized experiments are generally considered to be the gold standard. Observational…
Probabilistic risk aversion, defined through quasi-convexity in probabilistic mixtures, is a common useful property in decision analysis. We study a general class of non-monotone mappings, called the generalized rank-dependent functions,…
How should well-being be prioritised in society, and what trade-offs are people willing to make between fairness and personal well-being? We investigate these questions using a stated preference experiment with a nationally representative…
The paper explores the concept of the \emph{expectile risk measure} within the framework of the Fundamental Risk Quadrangle (FRQ) theory. According to the FRQ theory, a quadrangle comprises four stochastic functions associated with a random…
Risk assessment instruments are used across the criminal justice system to estimate the probability of some future behavior given covariates. The estimated probabilities are then used in making decisions at the individual level. In the…
The commonplace description of phase 1 clinical trials in oncology as "primarily concerned with safety" is belied by their near universal adoption of dose-escalation practices which are inherently unsafe. In contrast with dose titration,…
Procyclicality of historical risk measure estimation means that one tends to over-estimate future risk when present realized volatility is high and vice versa under-estimate future risk when the realized volatility is low. Out of it…
We provide and axiomatize a representation for preferences over lotteries that generalizes the expected utility model. Since the representation uses different utility functions to evaluate different lotteries, the preferences can be…
This paper considers quantile-welfare evaluation of social welfare as an alternative to utilitarian evaluation. Manski (1988) originally proposed and studied maximization of quantile utility as a model of individual decision making under…
Financial institutions have to allocate so-called "economic capital" in order to guarantee solvency to their clients and counter parties. Mathematically speaking, any methodology of allocating capital is a "risk measure", i.e. a function…
I conduct Rabin's (2000) calibration exercise in the subjective expected utility realm. I show that the rejection of some risky bet by a risk-averse agent only implies the rejection of more extreme and less desirable bets and nothing more.
Traditional learning approaches for classification implicitly assume that each mistake has the same cost. In many real-world problems though, the utility of a decision depends on the underlying context $x$ and decision $y$. However,…
Aggregating risks from multiple sources can be complex and demanding, and decision makers usually adopt heuristics to simplify the evaluation process. This paper axiomatizes two closed related and yet different heuristics, narrow bracketing…
We propose a consumption-investment decision model where past consumption peak $h$ plays a crucial role. There are two important consumption levels: the lowest constrained level and a reference level, at which the risk aversion in terms of…
We demonstrate a limitation of discounted expected utility, a standard approach for representing the preference to risk when future cost is discounted. Specifically, we provide an example of the preference of a decision maker that appears…
Expectile bears some interesting properties in comparison to the industry wide expected shortfall in terms of assessment of tail risk. We study the relationship between expectile and expected shortfall using duality results and the link to…
The utility-based shortfall risk (SR) measure introduced by Folmer and Schied [15] has been recently extended by Mao and Cai [29] to cumulative prospect theory (CPT) based SR in order to better capture a decision maker's utility/risk…
Some risks have extremely high stakes. For example, a worldwide pandemic or asteroid impact could potentially kill more than a billion people. Comfortingly, scientific calculations often put very low probabilities on the occurrence of such…
Recently, authors have studied inequalities involving expectations of selected functions viz. failure rate, mean residual life, aging intensity function and log-odds rate which are defined for left truncated random variables in reliability…
This note will extend the research presented in Brown & Rogers (2009) to the case of CRRA agents. We consider the model outlined in that paper in which agents had diverse beliefs about the dividends produced by a risky asset. We now assume…