Related papers: Risk Aversion and Insurance Propensity
We propose a novel approach to infer investors' risk preferences from their portfolio choices, and then use the implied risk preferences to measure the efficiency of investment portfolios. We analyze a dataset spanning a period of six…
The standard asset pricing models (the CCAPM and the Epstein-Zin non-expected utility model) counterintuitively predict that equilibrium asset prices can rise if the representative agent's risk aversion increases. If the income effect,…
This paper empirically analyzes how individual characteristics are associated with risk aversion, loss aversion, time discounting, and present bias. To this end, we conduct a large-scale demographically representative survey across eight…
We provide sufficient conditions for semi-nonparametric point identification of a mixture model of decision making under risk, when agents make choices in multiple lines of insurance coverage (contexts) by purchasing a bundle. As a first…
This study investigates the impact of loss-framing and individual risk attitude on willingness- to purchase insurance products utilizing a game-like interface as choice architecture. The application presents events as experienced in real…
We introduce a way to compare actions in decision problems. One action is safer than another if the set of beliefs at which the decision-maker prefers the safer action expands as the decision-maker becomes more risk averse. We provide a…
I propose a functional on the space of spectral risk measures that quantifies their ``degree of risk aversion''. This quantification formalizes the idea that some risk measures are ``more risk-averse'' than others. I construct the…
In the paper there is studied an optimal saving model in which the interest-rate risk for saving is a fuzzy number. The total utility of consumption is defined by using a concept of possibilistic expected utility. A notion of possibilistic…
The demand for voluntary insurance against low-probability, high-impact risks is lower than expected. To assess the magnitude of the demand, we conduct a meta-analysis of contingent valuation studies using a dataset of experimentally…
Most people are risk-averse (risk-seeking) when they expect to gain (lose). Based on a generalization of ``expected utility theory'' which takes this into account, we introduce an automaton mimicking the dynamics of economic operations.…
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…
Consider an investor trading dynamically to maximize expected utility from terminal wealth. Our aim is to study the dependence between her risk aversion and the distribution of the optimal terminal payoff. Economic intuition suggests that…
Ramsey (1926) sketches a proposal for measuring the subjective probabilities of an agent by their observable preferences, assuming that the agent is an expected utility maximizer. I show how to extend the spirit of Ramsey's method to a…
We introduce a model-free preference under ambiguity, as a primitive trait of behavior, which we apply once as well as repeatedly. Its single and double application yield simple, easily interpretable definitions of ambiguity aversion and…
A new multivariate distribution possessing arbitrarily parametrized and positively dependent univariate Pareto margins is introduced. Unlike the probability law of Asimit et al. (2010) [Asimit, V., Furman, E. and Vernic, R. (2010) On a…
We study a space of coherent risk measures M_phi obtained as certain expansions of coherent elementary basis measures. In this space, the concept of ``Risk Aversion Function'' phi naturally arises as the spectral representation of each risk…
Roy's `Safety First' criterion for selecting one risky asset from many is adapted to the case of non-normal returns, via Cornish Fisher expansion. The resulting investment objective is consistent with first order stochastic dominance, and…
Offline reinforcement learning (RL) is suitable for safety-critical domains where online exploration is too costly or dangerous. In such safety-critical settings, decision-making should take into consideration the risk of catastrophic…
Protecting against cyber-threats is vital for every organization and can be done by investing in cybersecurity controls and purchasing cyber insurance. However, these are interlinked since insurance premiums could be reduced by investing…
This work presents an asset pricing model that under rational expectation equilibrium perspective shows how, depending on risk aversion and noise volatility, a risky-asset has one equilibrium price that differs in term of efficiency: an…