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We adress the maximization problem of expected utility from terminal wealth. The special feature of this paper is that we consider a financial market where the price process of risky assets can have a default time. Using dynamic…
We show that the main results of the expected utility and dual utility theories can be derived in a unified way from two fundamental mathematical ideas: the separation principle of convex analysis, and integral representations of continuous…
We provide sufficient conditions under which a utility function may be recovered from a finite choice experiment. Identification, as is commonly understood in decision theory, is not enough. We provide a general recoverability result that…
We extend well-known comparative results under expected utility to models of non-expected utility by providing novel conditions on local utility functions. We illustrate how our results parallel, and are distinct from, existing results for…
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.…
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…
In the large financial market, which is described by a model with countably many traded assets, we formulate the problem of the expected utility maximization. Assuming that the preferences of an economic agent are modeled with a stochastic…
The expected utility hypothesis is a popular concept in economics that is useful for making decisions when the payoff is uncertain. In this paper, we investigate the implications of a fluctuation theorem in the theory of expected utility.…
We study the sensitivity of the expected utility maximization problem in a continuous semi-martingale market with respect to small changes in the market price of risk. Assuming that the preferences of a rational economic agent are modeled…
In random expected utility (Gul and Pesendorfer, 2006), the distribution of preferences is uniquely recoverable from random choice. This paper shows through two examples that such uniqueness fails in general if risk preferences are random…
We develop a tractable model of realization utility that studies the role of reference-dependent S-shaped preferences in a dynamic investment setting with reinvestment. Our model generates both voluntarily realized gains and losses. It…
In this paper, we consider the problem of maximizing the expected discounted utility of dividend payments for an insurance company that controls risk exposure by purchasing proportional reinsurance. We assume the preference of the insurer…
This study investigates the influence of risk tolerance on the expected utility in the long run. We estimate the extent to which the expected utility of optimal portfolios is affected by small changes in the risk tolerance. For this…
We consider a generalization of the recursive utility model by adding a new component that represents utility of investment gains and losses. We also study the utility process in this generalized model with constant elasticity of…
We investigate a continuous-time investment-consumption problem with model uncertainty in a general diffusion-based market with random model coefficients. We assume that a power utility investor is ambiguity-averse, with the preference to…
A family of models of individual discrete choice are constructed by means of statistical averaging of choices made by a subject in a reinforcement learning process, where the subject has short, k-term memory span. The choice probabilities…
We study a discrete-time consumption-based capital asset pricing model under expectations-based reference-dependent preferences. More precisely, we consider an endowment economy populated by a representative agent who derives utility from…
The main goal of this paper is to describe an axiomatic utility theory for Dempster-Shafer belief function lotteries. The axiomatic framework used is analogous to von Neumann-Morgenstern's utility theory for probabilistic lotteries as…
This note will extend the research presented in Brown & Rogers (2009) to the case of CRRA agents. We consider the model outlined in that paper in which agents had diverse beliefs about the dividends produced by a risky asset. We now assume…
We find the asymptotics of the value function maximizing the expected utility of discounted dividend payments of an insurance company whose reserves are modeled as a classical Cram\'er risk process, with exponentially distributed claims,…