Related papers: A Non-Parametric Test of Risk Aversion
An investor's risk aversion is assumed to tend to infinity. In a fairly general setting, we present conditions ensuring that the respective utility indifference prices of a given contingent claim converge to its super replication price.
In classification with a reject option, the classifier is allowed in uncertain cases to abstain from prediction. The classical cost-based model of a reject option classifier requires the cost of rejection to be defined explicitly. An…
The left tail of the implied volatility skew, coming from quotes on out-of-the-money put options, can be thought to reflect the market's assessment of the risk of a huge drop in stock prices. We analyze how this market information can be…
Risk management is very important for individual investors or companies. There are many ways to measure the risk of investment. Prices of risky assets vary rapidly and randomly due to the complexity of finance market. Random interval is a…
Risk measures connect probability theory or statistics to optimization, particularly to convex optimization. They are nowadays standard in applications of finance and in insurance involving risk aversion. This paper investigates a wide…
Risk sensitive decision making finds important applications in current day use cases. Existing risk measures consider a single or finite collection of random variables, which do not account for the asymptotic behaviour of underlying…
Flexibility options, such as demand response, energy storage and interconnection, have the potential to reduce variation in electricity prices between different future scenarios, therefore reducing investment risk. Moreover, investment in…
Motivated by optimal investment problems in mathematical finance, we consider a variational problem of Neyman-Pearson type for law-invariant robust utility functionals and convex risk measures. Explicit solutions are found for…
This paper studies the continuous time mean-variance portfolio selection problem with one kind of non-linear wealth dynamics. To deal the expectation constraint, an auxiliary stochastic control problem is firstly solved by two new…
The estimation of risk measures recently gained a lot of attention, partly because of the backtesting issues of expected shortfall related to elicitability. In this work we shed a new and fundamental light on optimal estimation procedures…
Stochastic dominance is a preference relation of uncertain prospect defined over a class of utility functions. While this utility class represents basic properties of risk aversion, it includes some extreme utility functions rarely…
Selective Classification, wherein models can reject low-confidence predictions, promises reliable translation of machine-learning based classification systems to real-world scenarios such as clinical diagnostics. While current evaluation of…
We show in a simulation when economic agents are subject to evolution (random change and selection based on the success in the estimation of the result of the gamble) they acquire risk aversive behavior. This behavior appears in the form of…
One of the commonly used approaches to capture dependence in multivariate survival data is through the frailty variables. The identifiability issues should be carefully investigated while modeling multivariate survival with or without…
Statistical inferential results generally come with a measure of reliability for decision-making purposes. For a policy implementer, the value of implementing published policy research depends critically upon this reliability. For a policy…
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…
People often deviate from expected utility theory when making risky and intertemporal choices. While the effects of probabilistic risk and time delay have been extensively studied in isolation, their interplay and underlying theoretical…
Alerting experience with a well-acknowledged safety analysis code initiated the authors to pay attention to safety issues of complex systems. Their first concern was the statistical characteristics of such a code. We point out a remarkable…
This paper investigates a novel behavioral feature of recursive preferences: aversion to risks that persist over time, or simply \textit{correlation aversion}. Greater persistence provides information about future consumption but reduces…
Recovering and distinguishing between the strict-preference, indifference and/or indecisiveness parts of a decision maker's preferences is a challenging task but also important for testing theory and conducting welfare analysis. This paper…