Related papers: Measuring Price Risk Aversion through Indirect Uti…
We suggest a new single-equation test for Uncovered Interest Parity (UIP) based on a dynamic regression approach. The method provides consistent and asymptotically efficient parameter estimates, and is not dependent on assumptions of strict…
Financial markets based on L\'evy processes are typically incomplete and option prices depend on risk attitudes of individual agents. In this context, the notion of utility indifference price has gained popularity in the academic circles.…
We model human decision-making behaviors in a risk-taking task using inverse reinforcement learning (IRL) for the purposes of understanding real human decision making under risk. To the best of our knowledge, this is the first work applying…
Random Utility Models (RUMs) are a classical framework for modeling user preferences and play a key role in reward modeling for Reinforcement Learning from Human Feedback (RLHF). However, a crucial shortcoming of many of these techniques is…
This paper develops a risk-adjusted alternative to standard optimal policy learning (OPL) for observational data by importing Roy's (1952) safety-first principle into the treatment assignment problem. We formalize a welfare functional that…
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…
Absolute anonymization, conceived as an irreversible transformation that prevents re-identification and sensitive value disclosure, has proven to be a broken promise. Consequently, modern data protection must shift toward a privacy-utility…
We show that risk-aware behaviors in demand response originate from superquadratic state-dependent cost functions and price uncertainty with skewed distributions. We obtain such results through developing a novel theoretical demand response…
Gilboa and Schmeidler's (1989) uncertainty aversion plays a central role in decision theory and economics, yet many inconsistent behaviors have been observed in experiments. Motivated by this, we study an axiom postulating a minimal degree…
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…
In the general framework of a semimartingale financial model and a utility function $U$ defined on the positive real line, we compute the first-order expansion of marginal utility-based prices with respect to a ``small'' number of random…
We propose a method to assess the intrinsic risk carried by a financial position $X$ when the agent faces uncertainty about the pricing rule assigning its present value. Our approach is inspired by a new interpretation of the quasiconvex…
We implement nonparametric revealed-preference tests of subjective expected utility theory and its generalizations. We find that a majority of subjects' choices are consistent with the maximization of some utility function. They respond to…
We develop a framework for interacting with uncertain environments in reinforcement learning (RL) by leveraging preferences in the form of utility functions. We claim that there is value in considering different risk measures during…
In this paper, we study the exponential utility indifference pricing of pure endowment policies within a stochastic-factor model for an insurer who also invests in a financial market. Our framework incorporates a hazard rate modeled as an…
In this paper, we examine the biases that arise when firms run A/B tests on continuous parameters to estimate global treatment effects on performance metrics of interest; we particularly focus on price experiments to measure the price…
Modern portfolio theory(MPT) addresses the problem of determining the optimum allocation of investment resources among a set of candidate assets. In the original mean-variance approach of Markowitz, volatility is taken as a proxy for risk,…
We consider the Bachelier model with linear price impact. Exponential utility indifference prices are studied for vanilla European options and we compute their non-trivial scaling limit for a vanishing price impact which is inversely…
We consider a discrete-time robust utility maximisation with semistatic strategies, and the associated indifference prices of exotic options. For this purpose, we introduce a robust form of convex integral functionals on the space of…
We study Pareto efficiency in a pure-exchange economy where agents' preferences are represented by risk-averse monetary utilities. These coincide with law-invariant monetary utilities, and they can be shown to correspond to the class of…