Related papers: Linear fractional relative risk aversion
After defining in detail the Lambert $W$-function branches, we give a large number of exact identities involving (infinite) symmetric functions of these branches, as well as geometrically convergent series for all the branches. In doing so,…
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…
We introduce in this paper a new four-parameter generalized version of the linear failure rate (LFR) distribution which is called Beta-linear failure rate (BLFR) distribution. The new distribution is quite flexible and can be used…
Transaction costs play a critical role in asset allocation and consumption strategies in portfolio management. We apply the methods of dynamic programming and singular perturbation expansion to derive the closed-form leading solutions to…
In a context of illiquidity, the reservation price is a well-accepted alternative to the usual martingale approach which does not apply. However, this price is not available in closed form and requires numerical methods such as Monte Carlo…
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…
This paper presents a method for incorporating risk aversion into existing decision tree models used in economic evaluations. The method involves applying a probability weighting function based on rank dependent utility theory to reduced…
The comparative statics of the optimal portfolios across individuals is carried out for a continuous-time complete market model, where the risky assets price process follows a joint geometric Brownian motion with time-dependent and…
In economics, risk aversion is modeled via a concave Bernoulli utility within the expected-utility paradigm. We propose a simple test of expected utility and concavity. We find little support for either: only 30 percent of the choices are…
Reduced rank regression (RRR) is a widely employed model for investigating the linear association between multiple response variables and a set of predictors. While RRR has been extensively explored in various works, the focus has…
Standard decision theory seeks conditions under which a preference relation can be compressed into a single real-valued function. However, when preferences are incomplete or intransitive, a single function fails to capture the agent's…
Under expected utility the local index of absolute risk aversion has played a central role in many applications. Besides, its link with the "global" concepts of the risk and probability premia has reinforced its attractiveness. This paper…
In the realm of reinforcement learning (RL), accounting for risk is crucial for making decisions under uncertainty, particularly in applications where safety and reliability are paramount. In this paper, we introduce a general framework on…
In this paper, we explore a static setting for the assessment of risk in the context of mathematical finance and actuarial science that takes into account model uncertainty in the distribution of a possibly infinite-dimensional risk factor.…
The FARIMA models, which have long-range-dependence (LRD), are widely used in many areas. Through deriving a precise characterisation of the spectrum, autocovariance function, and variance time function, we show that this family is very…
Risk and utility functionals are fundamental building blocks in economics and finance. In this paper we investigate under which conditions a risk or utility functional is sensitive to the accumulation of losses in the sense that any…
The consumption function maps current wealth and the exogenous state to current consumption. We prove the existence and uniqueness of a consumption function when the agent has a preference for wealth. When the period utility functions are…
Linear Quadratic Gaussian (LQG) systems are well-understood and methods to minimize the expected cost are readily available. Less is known about the statistical properties of the resulting cost function. The contribution of this paper is a…
We study the connection between risk aversion, number of consumers and uniqueness of equilibrium. We consider an economy with two goods and $c$ impatience types, where each type has additive separable preferences with HARA Bernoulli utility…
Spectral risk measures are attractive risk measures as they allow the user to obtain risk measures that reflect their risk-aversion functions. To date there has been very little guidance on the choice of risk-aversion functions underlying…