Related papers: Utility of Choice: An Information Theoretic Approa…

Utility Computing has facilitated the creation of new markets that has made it possible to realize the long held dream of delivering IT as a Utility. Even though utility computing is in its nascent stage today, the proponents of utility…

This paper diverges from previous literature by considering the utility maximization problem in the context of investors having the freedom to actively acquire additional information to mitigate estimation risk. We derive closed-form value…

We consider a discrete-time model of a financial market where a risky asset is bought and sold with transactions having a transient price impact. It is shown that the corresponding utility maximization problem admits a solution. We manage…

We investigate optimal consumption and investment problems for a Black-Scholes market under uniform restrictions on Value-at-Risk and Expected Shortfall. We formulate various utility maximization problems, which can be solved explicitly. We…

This paper discusses capabilities that are essential to models applied in policy analysis settings and the limitations of direct applications of off-the-shelf machine learning methodologies to such settings. Traditional econometric…

We propose a new approach to utilities that is consistent with state-dependent utilities. In our model utilities reflect the level of consumption satisfaction of flows of cash in future times as they are valued when the economic agents are…

After a brief review of option pricing theory, we introduce various methods proposed for extracting the statistical information implicit in options prices. We discuss the advantages and drawbacks of each method, the interpretation of their…

By embedding uncertainty into time, we obtain a conjoint axiomatic characterization of both Exponential Discounting and Subjective Expected Utility that accommodates arbitrary state and outcome spaces. In doing so, we provide a novel and…

A classical portfolio theory deals with finding the optimal proportion in which an agent invests a wealth in a risk-free asset and a probabilistic risky asset. Formulating and solving the problem depend on how the risk is represented and…

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…

The aim of this short note is to present a solution to the discrete time exponential utility maximization problem in a case where the underlying asset has a multivariate normal distribution. In addition to the usual setting considered in…

The famous Saint Petersburg Paradox (St. Petersburg Paradox) shows that the theory of expected value does not capture the real-world economics of decision-making problems. Over the years, many economic theories were developed to resolve the…

A new framework for asset price dynamics is introduced in which the concept of noisy information about future cash flows is used to derive the price processes. In this framework an asset is defined by its cash-flow structure. Each cash flow…

In this paper, we consider a financial market with assets exposed to some risks inducing jumps in the asset prices, and which can still be traded after default times. We use a default-intensity modeling approach, and address in this…

The aim of this paper is to propose a generalization of previous approaches in qualitative decision making. Our work is based on the binary possibilistic utility (PU), which is a possibilistic counterpart of Expected Utility (EU).We first…

In this paper we take a look at a simple portfolio insurance strategy using a protective put and computationally derive the investor's governing utility structures underlying such a strategy under alternative market scenarios. Investor…

We consider an optimal investment-consumption problem for a utility-maximizing investor who has access to assets with different liquidity and whose consumption rate as well as terminal wealth are subject to lower-bound constraints. Assuming…

We implement nonparametric revealed-preference tests of subjective expected utility theory and its generalizations. We find that a majority of subjects' choices are consistent with the maximization of some utility function. They respond to…

The exploration-exploitation trade-off is central to the description of adaptive behaviour in fields ranging from machine learning, to biology, to economics. While many approaches have been taken, one approach to solving this trade-off has…

Bayesian decision theory outlines a rigorous framework for making optimal decisions based on maximizing expected utility over a model posterior. However, practitioners often do not have access to the full posterior and resort to approximate…