Related papers: Probability Premium and Attitude Towards Probabili…
Managing a portfolio to a risk model can tilt the portfolio toward weaknesses of the model. As a result, the optimized portfolio acquires downside exposure to uncertainty in the model itself, what we call "second order risk." We propose a…
The risk premium of a policy is the sum of the pure premium and the risk loading. In the classification ratemaking process, generalized linear models are usually used to calculate pure premiums, and various premium principles are applied to…
A distinction is sometimes made between "statistical" and "subjective" probabilities. This is based on a distinction between "unique" events and "repeatable" events. We argue that this distinction is untenable, since all events are "unique"…
Algorithmic predictions are increasingly used to inform the allocations of goods and interventions in the public sphere. In these domains, predictions serve as a means to an end. They provide stakeholders with insights into likelihood of…
In the present article we use the quantum formalism to describe the effects of risk and ambiguity in decision theory. The main idea is that the probabilities in the classic theory of expected utility are estimated probabilities, and thus do…
A mathematical model of Subject behaviour choice is proposed. The background of the model is the concept of two preference relations determining Subject behaviour. These are an "internal" or subjective preference relation and an "external"…
We describe some recent approaches to likelihood based inference in the presence of nuisance parameters. Our approach is based on plotting the likelihood function and the $p$-value function, using recently developed third order…
We introduce and consider a certain probability question involving elementary number theory and the likelihood that a fixed prime will appear in a certain recursively defined factorization of an integer. We derive several convergent…
For personalized ranking models, the well-calibrated probability of an item being preferred by a user has great practical value. While existing work shows promising results in image classification, probability calibration has not been much…
To determine the welfare implications of price changes in demand data, we introduce a revealed preference relation over prices. We show that the absence of cycles in this relation characterizes a consumer who trades off the utility of…
Through extended consideration of two wide classes of case studies -- dilute gases and linear systems -- I explore the ways in which assumptions of probability and irreversibility occur in contemporary statistical mechanics, where the…
We provide an axiomatic characterization of lexicographic preferences over the set of all random availability functions using two assumptions. The first assumption is strong monotonicity, which in our framework is equivalent to the strong…
One the one hand, rough volatility has been shown to provide a consistent framework to capture the properties of stock price dynamics both under the historical measure and for pricing purposes. On the other hand, market price of volatility…
We introduce a new paradigm for risk sharing that generalizes earlier models based on discrete agents and extends them to allow for sharing risk within a continuum of agents. Agents are represented by points of a measure space and have…
This article examines the effect of different other-regarding preference types on the emergence of altruistic punishment behavior from an evolutionary perspective. Our findings corroborate, complement, and interlink the experimental and…
Richard Cox [1] set the axiomatic foundations of probable inference and the algebra of propositions. He showed that consistency within these axioms requires certain rules for updating belief. In this paper we use the analogy between…
Typical risk classification procedure in insurance is consists of a priori risk classification determined by observable risk characteristics, and a posteriori risk classification where the premium is adjusted to reflect the policyholder's…
We generalize the stochastic revealed preference methodology of McFadden and Richter (1990) for finite choice sets to settings with limited consideration. Our approach is nonparametric and requires partial choice set variation. We impose a…
Most decision theories, including expected utility theory, rank dependent utility theory and cumulative prospect theory, assume that investors are only interested in the distribution of returns and not in the states of the economy in which…
Ranking and comparing items is crucial for collecting information about preferences in many areas, from marketing to politics. The Mallows rank model is among the most successful approaches to analyse rank data, but its computational…