Related papers: Utility Function from Maximum Entropy Principle
The maximum entropy principle can be used to assign utility values when only partial information is available about the decision maker's preferences. In order to obtain such utility values it is necessary to establish an analogy between…
Recent literature in the last Maximum Entropy workshop introduced an analogy between cumulative probability distributions and normalized utility functions. Based on this analogy, a utility density function can de defined as the derivative…
The notion of utility maximising entropy (u-entropy) of a probability density, which was introduced and studied by Slomczynski and Zastawniak (Ann. Prob 32 (2004) 2261-2285, arXiv:math.PR/0410115 v1), is extended in two directions. First,…
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…
Expected utility maximization problems in mathematical finance lead to a generalization of the classical definition of entropy. It is demonstrated that a necessary and sufficient condition for the second law of thermodynamics to operate is…
We use the maximum entropy principle for pricing the non-life insurance and recover the B\"{u}hlmann results for the economic premium principle. The concept of economic equilibrium is revised in this respect.
We consider the economic problem of optimal consumption and investment with power utility. We study the optimal strategy as the relative risk aversion tends to infinity or to one. The convergence of the optimal consumption is obtained for…
We pursue an inverse approach to utility theory and consumption & investment problems. Instead of specifying an agent's utility function and deriving her actions, we assume we observe her actions (i.e. her consumption and investment…
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…
Nowadays, attitudes towards electricity customers have been changed, so that they are no longer considered static players. The customers behavior identification is vital for establishing modern power systems. This paper utilizes the…
We consider an agent who has access to a financial market, including derivative contracts, who looks to maximise her utility. Whilst the agent looks to maximise utility over one probability measure, or class of probability measures, she…
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…
A key issue in the estimation of energy hedges is the hedgers' attitude towards risk which is encapsulated in the form of the hedgers' utility function. However, the literature typically uses only one form of utility function such as the…
It is possible to derive the maximum entropy principle from thermodynamic stability requirements. Using as a starting point the equilibrium probability distribution, currently used in non-extensive thermostatistics, it turns out that the…
A formulation of the density functional theory is constructed on the foundations of entropic inference. The theory is introduced as an application of maximum entropy for inhomogeneous fluids in thermal equilibrium. It is shown that entropic…
We formulate conditions for the solvability of the problem of robust utility maximization from final wealth in continuous time financial markets, without assuming weak compactness of the densities of the uncertainty set, as customary in the…
We present a theory of expected utility with state-dependent linear utility functions for monetary returns, that incorporates the possibility of loss-aversion. Our results relate to first order stochastic dominance, mean-preserving spread,…
In this paper we derive the maximum entropy characteristics of a particular rank order distribution, namely the discrete generalized beta distribution, which has recently been observed to be extremely useful in modelling many several…
A unified formulation of the density functional theory is constructed on the foundations of entropic inference in both the classical and the quantum regimes. The theory is introduced as an application of entropic inference for inhomogeneous…
Probability distributions of money, income, and energy consumption per capita are studied for ensembles of economic agents. The principle of entropy maximization for partitioning of a limited resource gives exponential distributions for the…