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Expected utility theory (EUT) is widely used in economic theory. However, its subjective probability formulation, first elaborated by Savage, is linked to Ellsberg-like paradoxes and ambiguity aversion. This has led various scholars to work…
The call for patient-focused drug development is loud and clear, as expressed in the 21st Century Cures Act and in recent guidelines and initiatives of regulatory agencies. Among the factors contributing to modernized drug development and…
Although the existing causal inference literature focuses on the forward-looking perspective by estimating effects of causes, the backward-looking perspective can provide insights into causes of effects. In backward-looking causal…
One typical assumption in inverse reinforcement learning (IRL) is that human experts act to optimize the expected utility of a stochastic cost with a fixed distribution. This assumption deviates from actual human behaviors under ambiguity.…
This seemed impossible to use a theoretically adequate but too sophisticated risk measure called non-ruin capital, whence its widespread (including regulatory documents) replacement with an inadequate, but simple risk measure called…
Heavy-tailed distributions, such as the Cauchy distribution, are acknowledged for providing more accurate models for financial returns, as the normal distribution is deemed insufficient for capturing the significant fluctuations observed in…
Accounting for model uncertainty in risk management and option pricing leads to infinite dimensional optimization problems which are both analytically and numerically intractable. In this article we study when this hurdle can be overcome…
Assuming that agents' preferences satisfy first-order stochastic dominance, we show how the Expected Utility paradigm can rationalize all optimal investment choices: the optimal investment strategy in any behavioral law-invariant…
The risk of a financial position is usually summarized by a risk measure. As this risk measure has to be estimated from historical data, it is important to be able to verify and compare competing estimation procedures. In statistical…
We extend the lifecycle model (LCM) of consumption over a random horizon (a.k.a. the Yaari model) to a world in which (i.) the force of mortality obeys a diffusion process as opposed to being deterministic, and (ii.) a consumer can adapt…
Causal inference with time-to-event outcomes is fundamental in various scientific studies. In a static setup with fitted propensity scores, weighted Kaplan-Meier estimation for survival probabilities and weighted Breslow-Peto estimation for…
The maximum entropy principle can be used to assign utility values when only partial information is available about the decision maker's preferences. In order to obtain such utility values it is necessary to establish an analogy between…
In epidemic or pandemic situations, resources for testing the infection status of individuals may be scarce. Although group testing can help to significantly increase testing capabilities, the (repeated) testing of entire populations can…
This writing: a) Draws attention to the intricacies inherent to the pursuit of a universal seizure definition even when powerful, well understood signal analysis methods are utilized to this end; b) Identifies this aim as a multi-objective…
Estimation of tail quantities, such as expected shortfall or Value at Risk, is a difficult problem. We show how the theory of nonlinear expectations, in particular the Data-robust expectation introduced in [5], can assist in the…
We respond to Tetlock et al. (2022) showing 1) how expert judgment fails to reflect tail risk, 2) the lack of compatibility between forecasting tournaments and tail risk assessment methods (such as extreme value theory). More importantly,…
We consider the setting in which an electric power utility seeks to curtail its peak electricity demand by offering a fixed group of customers a uniform price for reductions in consumption relative to their predetermined baselines. The…
Spectral risk measures are attractive risk measures as they allow the user to obtain risk measures that reflect their subjective risk-aversion. This paper examines spectral risk measures based on an exponential utility function, and finds…
Survival time is the primary endpoint of many randomized controlled trials, and a treatment effect is typically quantified by the hazard ratio under the assumption of proportional hazards. Awareness is increasing that in many settings this…
We consider the economic problem of optimal consumption and investment with power utility. We study the optimal strategy as the relative risk aversion tends to infinity or to one. The convergence of the optimal consumption is obtained for…