Risk aversion indivisible timing options and gambling

Risk Aversion, Indivisible Timing Options and Gambling† Vicky Henderson‡ University of Oxford David Hobson§ University of Warwick May 20, 2011 Abstract In this paper we model the behavior of a risk averse agent who seeks to maximize expected utility and who has an indivisible asset and a timing option over when to sell this asset.

Why do People Buy Lottery Tickets? Choices Involving Risk Studies of risk preference have empirically established two regularities that are inconsistent with the canonical expected utility model: (1) risk aversion over small gambles greatly exceeds risk aversion over larger stakes and (2) insurance buyers play the lottery. Valuing Oil Properties: Integrating Option Pricing and There are two major competing procedures for evaluating risky projects where managerial flexibility plays an important role: one is decision analytic, based on stochastic dynamic programming, and the other is option pricing theory (or contingent claims analysis), based on the no-arbitrage theory of financial markets. In this paper, we show how these two approaches can be profitably integrated From Risk-Seeking to Risk-Averse: The Development of

The body of evidence conflicting with EU theory has grown over time. ... Finally, there are behavioral choices, such as those relating to gambling and the widespread ... Thus, the purchase of lottery tickets by people who are generally risk-averse ... the existence of large indivisible items of expenditure (eg the purchase of a ...

The risky option sometimes involved an action and sometimes an omission, so thatRisk aversion in decision making is the tendency to avoid options associated with uncertain outcomes that differ inRisk-aversion measured with their questionnaire correlated with risk- aversion in gambling tasks (p... Risk Aversion and Incentive Effects

Do consumers gamble to convexify? - ScienceDirect

The typical measures of risk-aversion and risk-seeking for differentiable utility functions are the Arrow–Pratt coefficients of absolute and relative risk-aversion. 5 However, these measures are never well defined for knapsack utility functions as a result of the following theorem. Utility Maximization with Discretionary Stopping | SIAM Journal on ... (2013) Risk Aversion, Indivisible Timing Options, and Gambling. Operations Research 61 :1, 126-137. (2012) Optimal consumption-leisure, portfolio and retirement selection based on α-maxmin expected CES utility with ambiguity. Appears the best for the risk neutral subjects in - Course Hero 12 References Henderson V and Hobson D (2014), “ Risk aversion, indivisible timing options, and gambling ”, Operations Research, 61, 126-137.

Risk aversion, indivisible timing options, and gambling. Co-author: V. Henderson. Operations Research 61, Issue 1, 126-137, Jan-Feb 2013. Maximising functionals of the joint law of the maximum and terminal value in the Skorokhod embedding problem. Co-author: M. Klimmek. arXiv:1012.3909 Annals of Applied Probability Vol. 23, No. 5, p2020-2052 2013.

A Review of Corporate Hedging Models and Their Relevance in ... A staged progression in assuming firms from risk-averse to risk neutral is evident in .... By this time, capital structure is given ex-ante and no study considers the ... Later, models develop focusing on managerial stock options, market power of .... function (risk averse) while gambling is optimal if indivisibility of investment is ... Examining Expected Utility Theory from Descriptive and ... - Silviu Pitis

The risk premium is 1.51. The new function has constant relative risk aversion equal to 3 4 > 1 2, so the risk premium is higher. This relates to the fact that v(w) = [u(w)]1/2, or v is an increasing concave transformation of u, so v is “more concave” than u. (e) Here we go back to the u function, and the risk as a proportion of the initial ...

21 Sep 2004 ... options markets like CBOE [18], futures markets like ... With log n events and indivisible bids, the problem is .... polynomial time and are considered to be computa- .... with constant absolute risk aversion, agreement on. L'avenir des marchés de l'électricité - Larsen 2 Nov 2006 ... supply of this good in the private market owing to the indivisibility of benefits, motivating agents to ... its investment choices and managing the system in real time with regard to the danger of .... In order to manage price fluctuations for risk- averse consumers, some also propose ...... risk of gaming with rules. Unexpected but Incidental Positive Outcomes Predict ... - The Otto Lab At the same time, unexpected positive outcomes, often called prediction errors, influence mood. ... ment of, the risk attitudes of New York City's gambling. Inference under stability of risk preferences - EconStor risk aversion (CARA), our main restriction on the shape of the utility function.3 Given. CARA ..... to each household at the time it made its deductible choices. According to conversa- ...... risk preferences from a panel of real-world betting choices. .... Forges, F. and V. Iehlé (2014), “Afriat's theorem for indivisible goods.” Journal ...