Related papers: Measuring Belief and Risk Attitude
We propose to interpret distribution model risk as sensitivity of expected loss to changes in the risk factor distribution, and to measure the distribution model risk of a portfolio by the maximum expected loss over a set of plausible…
Rewards typically express desirabilities or preferences over a set of alternatives. Here we propose that rewards can be defined for any probability distribution based on three desiderata, namely that rewards should be real-valued, additive…
Different machine learning techniques have been proposed and used for modeling individual and group user needs, interests and preferences. In the traditional predictive modeling instances are described by observable variables, called…
An analyst observes an agent take a sequence of actions. The analyst does not have access to the agent's information and ponders whether the observed actions could be justified through a rational Bayesian model with a known utility…
I describe a method for estimating agents' perceived returns to investments that relies on cross-sectional data containing binary choices and prices, where prices may be imperfectly known to agents. This method identifies the scale of…
This paper addresses the problem of defining a subjective interestingness measure for BI exploration. Such a measure involves prior modeling of the belief of the user. The complexity of this problem lies in the impossibility to ask the user…
The fundamental principle in Modern Portfolio Theory (MPT) is based on the quantification of the portfolio's risk related to performance. Although MPT has made huge impacts on the investment world and prompted the success and prevalence of…
We revisit the role of instrumental value as a driver of adaptive behavior. In active inference, instrumental or extrinsic value is quantified by the information-theoretic surprisal of a set of observations measuring the extent to which…
The inputs and preferences of human users are important considerations in situations where these users interact with autonomous cyber or cyber-physical systems. In these scenarios, one is often interested in aligning behaviors of the system…
The aim of the present paper is to provide criteria for a central bank of how to choose among different monetary-policy rules when caring about a number of policy targets such as the output gap and expected inflation. Special attention is…
Classic decision-theory is based on the maximum expected utility (MEU) principle, but crucially ignores the resource costs incurred when determining optimal decisions. Here we propose an axiomatic framework for bounded decision-making that…
This paper examines optimal risk sharing for empirically realistic risk attitudes, providing results on Pareto optimality, competitive equilibria, utility frontiers, and the first and second theorems of welfare. Contrary to common…
We study the design of autonomous agents that are capable of deceiving outside observers about their intentions while carrying out tasks in stochastic, complex environments. By modeling the agent's behavior as a Markov decision process, we…
We present an approach to derivative exposure management based on subjective and implied probabilities. We suggest to maximize the valuation difference subject to risk constraints and propose a class of risk measures derived from the…
In this paper, we consider the revealed preferences problem from a learning perspective. Every day, a price vector and a budget is drawn from an unknown distribution, and a rational agent buys his most preferred bundle according to some…
We develop a tractable model of realization utility that studies the role of reference-dependent S-shaped preferences in a dynamic investment setting with reinvestment. Our model generates both voluntarily realized gains and losses. It…
To study the assumption that the utility maximization hypothesis implicitly adds to consumer theory, we consider a mathematical representation of pre-marginal revolution consumer theory based on subjective exchange ratios. We introduce two…
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…
A central question in multi-agent strategic games deals with learning the underlying utilities driving the agents' behaviour. Motivated by the increasing availability of large data-sets, we develop an unifying data-driven technique to…
Diversification is the typical investment strategy of risk-averse agents. However, non-diversified positions that allocate all resources to a single asset, state of the world or revenue stream are common too. We show that whenever finitely…