Related papers: Risk Preferences in Time Lotteries
This paper discusses an alternative explanation for the empirical findings contradicting the positive relationship between risk (variance) and reward (expected return). We show that these contradicting results might be due to the false…
Mutually exclusive decisions have been studied for decades. Many well-known decision theories have been defined to help people either to make rational decisions or to interpret people's behaviors, such as expected utility theory, regret…
The expectation is an example of a descriptive statistic that is monotone with respect to stochastic dominance, and additive for sums of independent random variables. We provide a complete characterization of such statistics, and explore a…
This paper studies the optimal risk-averse timing to sell a risky asset. The investor's risk preference is described by the exponential, power, or log utility. Two stochastic models are considered for the asset price -- the geometric…
Recently, Frazier et al. proposed a natural model for crowdsourced exploration of different a priori unknown options: a principal is interested in the long-term welfare of a population of agents who arrive one by one in a multi-armed bandit…
Many biological, psychological and economic experiments have been designed where an organism or individual must choose between two options that have the same expected reward but differ in the variance of reward received. In this way,…
In this paper we investigate a utility maximization problem with drift uncertainty in a multivariate continuous-time Black-Scholes type financial market which may be incomplete. We impose a constraint on the admissible strategies that…
The aim of this work consists in the study of the optimal investment strategy for a behavioural investor, whose preference towards risk is described by both a probability distortion and an S-shaped utility function. Within a continuous-time…
A discrete time probabilistic model, for optimal equity allocation and portfolio selection, is formulated so as to apply to (at least) reinsurance. In the context of a company with several portfolios (or subsidiaries), representing both…
In this paper, we study the problem of expected utility maximization of an agent who, in addition to an initial capital, receives random endowments at maturity. Contrary to previous studies, we treat as the variables of the optimization…
We study the problem of option pricing and hedging strategies within the frame-work of risk-return arguments. An economic agent is described by a utility function that depends on profit (an expected value) and risk (a variance). In the…
This survey reviews portfolio selection problem for long-term horizon. We consider two objectives: (i) maximize the probability for outperforming a target growth rate of wealth process (ii) minimize the probability of falling below a target…
We model learning in a continuous-time Brownian setting where there is prior ambiguity. The associated model of preference values robustness and is time-consistent. It is applied to study optimal learning when the choice between actions can…
Decision theories offer principled methods for making choices under various types of uncertainty. Algorithms that implement these theories have been successfully applied to a wide range of real-world problems, including materials and drug…
We consider a discrete time financial market with proportional transaction costs under model uncertainty, and study a num\'eraire-based semi-static utility maximization problem with an exponential utility preference. The randomization…
Most studies of prosumer decision making in the smart grid have focused on single, temporally discrete decisions within the framework of expected utility theory (EUT) and behavioral theories such as prospect theory. In this work, we study…
In this paper we study the optimal investment and reinsurance problem of an insurance company whose investment preferences are described via a forward dynamic exponential utility in a regime-switching market model. Financial and actuarial…
We consider a popular model of microeconomics with countably many assets: the Arbitrage Pricing Model. We study the problem of optimal investment under an expected utility criterion and look for conditions ensuring the existence of optimal…
Approaches for estimating preferences from human annotated data typically involves inducing a distribution over a ranked list of choices such as the Plackett-Luce model. Indeed, modern AI alignment tools such as Reward Modelling and Direct…
We give a criterion under which the expected return on a ticket for certain large lotteries is positive. In this circumstance, we use elementary portfolio analysis to show that an optimal investment strategy includes a very small allocation…