The Use of Utility Functions for Investment Channel Choice in Defined Contribution Retirement Funds. II: A Proposed System

2003 ◽  
Vol 9 (4) ◽  
pp. 903-958 ◽  
Author(s):  
R. J. Thomson
Keyword(s):  
Stochastic Model ◽  
Utility Function ◽  
Stochastic Models ◽  
Utility Functions ◽  
Retirement Income ◽  
Defined Contribution ◽  
Channel Choice ◽  
Retirement Funds

ABSTRACTIn this paper a system for recommending investment channel choices to members of defined contribution retirement funds is proposed. The system is interactive, using a member's answers to a series of questions to derive a utility function. The observed values are interpolated by means of appropriate formulae to produce a smooth utility function over the whole positive range of benefits at retirement. The resulting function, together with stochastic models of the returns on the available channels and of the annuity factor at exit, is then used to recommend an optimum apportionment of the member's investment. The proposed system is applied to the observed values of utility functions of post-retirement income elicited from members of retirement funds. Difficulties in the application are discussed and the results are analysed. The sensitivity of the recommendations to the parameters of the stochastic model is discussed.

The Use of Utility Functions for Investment Channel Choice in Defined Contribution Retirement Funds. I: Defence

2003 ◽  
Vol 9 (3) ◽  
pp. 653-709 ◽  
Author(s):  
R.J. Thomson
Keyword(s):  
Empirical Evidence ◽  
Expected Utility ◽  
Utility Theory ◽  
Expected Utility Theory ◽  
Utility Functions ◽  
Defined Contribution ◽  
Channel Choice ◽  
Retirement Fund ◽  
Retirement Funds

ABSTRACTThis paper addresses the use of expected utility theory for the recommendation of an apportionment between investment channels of a member's interest in a defined contribution retirement fund. Such usage is defended against arguments that have been levelled against expected utility theory and empirical evidence is discussed.

The Application of Expected-Utility Theory to the Choice of Investment Channels in a Defined-Contribution Retirement Fund

2009 ◽  
Vol 39 (2) ◽  
pp. 615-647 ◽  
Author(s):  
Shaun Levitan ◽  
Robert Thomson
Keyword(s):  
Expected Utility Theory ◽  
Assessment Method ◽  
Utility Functions ◽  
Risk Tolerance ◽  
Defined Contribution ◽  
Practical Application ◽  
Retirement Benefits ◽  
Channel Choice ◽  
Retirement Fund ◽  
Standard Risk

AbstractThis study examines the practical application of a system for the derivation of member utility functions for the purpose of recommending investment-channel choice to members of a defined-contribution retirement fund. The utility functions of post-retirement benefits from members of a defined-contribution fund are elicited. The risk aversion of each member is measured and the results are compared with a standard risk-tolerance assessment method.

GPS-BDS-Galileo double-differenced stochastic model refinement based on least-squares variance component estimation

2021 ◽  
pp. 1-16
Author(s):  
Hong Hu ◽  
Xuefeng Xie ◽  
Jingxiang Gao ◽  
Shuanggen Jin ◽  
Peng Jiang
Keyword(s):  
Stochastic Model ◽  
Least Squares ◽  
Stochastic Models ◽  
Variance Component ◽  
Satellite System ◽  
Variance Component Estimation ◽  
Short Baseline ◽  
Component Estimation ◽  
Zero Baseline ◽  
Global Navigation Satellite

Abstract Stochastic models are essential for precise navigation and positioning of the global navigation satellite system (GNSS). A stochastic model can influence the resolution of ambiguity, which is a key step in GNSS positioning. Most of the existing multi-GNSS stochastic models are based on the GPS empirical model, while differences in the precision of observations among different systems are not considered. In this paper, three refined stochastic models, namely the variance components between systems (RSM1), the variances of different types of observations (RSM2) and the variances of observations for each satellite (RSM3) are proposed based on the least-squares variance component estimation (LS-VCE). Zero-baseline and short-baseline GNSS experimental data were used to verify the proposed three refined stochastic models. The results show that, compared with the traditional elevation-dependent model (EDM), though the proposed models do not significantly improve the ambiguity resolution success rate, the positioning precision of the three proposed models has been improved. RSM3, which is more realistic for the data itself, performs the best, and the precision at elevation mask angles 20°, 30°, 40°, 50° can be improved by 4⋅6%, 7⋅6%, 13⋅2%, 73⋅0% for L1-B1-E1 and 1⋅1%, 4⋅8%, 16⋅3%, 64⋅5% for L2-B2-E5a, respectively.

DECISION ANALYSIS WITH MULTIPLE OBJECTIVES IN A FRAMEWORK FOR EVALUATING IMPRECISION

2005 ◽  
Vol 13 (05) ◽  
pp. 495-509 ◽  
Author(s):  
ARON LARSSON ◽  
JIM JOHANSSON ◽  
LOVE EKENBERG ◽  
MATS DANIELSON
Keyword(s):  
Decision Tree ◽  
Utility Function ◽  
Evaluation Method ◽  
Convex Sets ◽  
Utility Functions ◽  
Probability Measures ◽  
Decisions Under Risk ◽  
Closed Intervals ◽  
Pros And Cons ◽  
Tree Evaluation

We present a decision tree evaluation method for analyzing multi-attribute decisions under risk, where information is numerically imprecise. The approach extends the use of additive and multiplicative utility functions for supporting evaluation of imprecise statements, relaxing requirements for precise estimates of decision parameters. Information is modeled in convex sets of utility and probability measures restricted by closed intervals. Evaluation is done relative to a set of rules, generalizing the concept of admissibility, computationally handled through optimization of aggregated utility functions. Pros and cons of two approaches, and tradeoffs in selecting a utility function, are discussed.

scholarly journals Impacts of stochastic models on real-time 3D UAV mapping

2014 ◽  
Vol XL-1 ◽  
pp. 35-44
Author(s):  
M. Alqurashi ◽  
J. Wang
Keyword(s):  
Stochastic Model ◽  
Real Time ◽  
Stochastic Models ◽  
Feature Matching ◽  
Critical Role ◽  
Image Feature ◽  
Mapping Process ◽  
Camera Orientation ◽  
Camera Position

In UAV mapping using direct geo-referencing, the formation of stochastic model generally takes into the account the different types of measurements required to estimate the 3D coordinates of the feature points. Such measurements include image tie point coordinate measurements, camera position measurements and camera orientation measurements. In the commonly used stochastic model, it is commonly assumed that all tie point measurements have the same variance. In fact, these assumptions are not always realistic and thus, can lead to biased 3D feature coordinates. Tie point measurements for different image feature objects may not have the same accuracy due to the facts that the geometric distribution of features, particularly their feature matching conditions are different. More importantly, the accuracies of the geo-referencing measurements should also be considered into the mapping process. In this paper, impacts of typical stochastic models on the UAV mapping are investigated. It has been demonstrated that the quality of the geo-referencing measurements plays a critical role in real-time UAV mapping scenarios.

scholarly journals Comparing utility functions between risky and riskless choice in rhesus monkeys

2021 ◽  
Author(s):  
Philipe M. Bujold ◽  
Simone Ferrari-Toniolo ◽  
Leo Chi U Seak ◽  
Wolfram Schultz
Keyword(s):  
Utility Function ◽  
Utility Theory ◽  
Utility Maximization ◽  
Choice Behavior ◽  
Expected Utility Theory ◽  
Utility Functions ◽  
Random Utility Maximization ◽  
Risky Choices ◽  
Neuronal Mechanisms ◽  
Subjective Value

AbstractDecisions can be risky or riskless, depending on the outcomes of the choice. Expected Utility Theory describes risky choices as a utility maximization process: we choose the option with the highest subjective value (utility), which we compute considering both the option’s value and its associated risk. According to the random utility maximization framework, riskless choices could also be based on a utility measure. Neuronal mechanisms of utility-based choice may thus be common to both risky and riskless choices. This assumption would require the existence of a utility function that accounts for both risky and riskless decisions. Here, we investigated whether the choice behavior of macaque monkeys in riskless and risky decisions could be described by a common underlying utility function. We found that the utility functions elicited in the two choice scenarios were different from each other, even after taking into account the contribution of subjective probability weighting. Our results suggest that distinct utility representations exist for riskless and risky choices, which could reflect distinct neuronal representations of the utility quantities, or distinct brain mechanisms for risky and riskless choices. The different utility functions should be taken into account in neuronal investigations of utility-based choice.

On the interpretation of random fluctuations in competing chemical systems

1983 ◽  
Vol 20 (04) ◽  
pp. 877-883
Author(s):  
Peter Hall
Keyword(s):  
Kinetic Theory ◽  
Stochastic Model ◽  
Chemical Reactions ◽  
Stochastic Models ◽  
Chemical Systems ◽  
Random Fluctuations

Several stochastic models have been proposed to describe the kinetic theory of reversible chemical reactions. However, in macroscopic systems the effects of stochastic variability are often outweighed by mean effects. In the present paper we show that some observed phenomena can be explained quite adequately by a stochastic model in which the stochastic variability is not negligible in comparison with mean effects. Our argument involves approximations to a stochastic model for competing chemical reactions.

scholarly journals The quantification of type-2 prudence in asset allocation by the trustees of a retirement fund

2016 ◽  
Vol 10 (2) ◽  
pp. 169-202
Author(s):  
Robert J. Thomson ◽  
Taryn L. Reddy
Keyword(s):  
Risk Aversion ◽  
Asset Allocation ◽  
Weighted Average ◽  
Expected Utility Theory ◽  
Model Parameters ◽  
Defined Benefit ◽  
Defined Contribution ◽  
New Class ◽  
Retirement Funds

AbstractIn this paper, consideration is given to the normative use of expected-utility theory for the purposes of asset allocation by the trustees of retirement funds. A distinction is drawn between “type-1 prudence”, which relates to deliberate conservatism on the part of actuaries in the setting of assumptions and the determination of model parameters, and “type-2 prudence”, which relates to the risk aversion of the trustees. The intention of the research was to quantify type-2 prudence for the purposes of asset allocation, both for defined-contribution (DC) and defined-benefit (DB) funds. The authors propose new definitions of the objective variables used as the argument of the utility function: one for DC funds and another for DB funds. A new class of utility functions, referred to as the “weighted average relative risk aversion” class is proposed. Practicalities of implementation are discussed. Illustrative results of the application of the method are presented, and it is shown that the proposed approach resolves the paradox of counter-intuitive results found in the literature regarding the sensitivity of the optimal asset allocation to the funding level of a DB fund.

scholarly journals New Dutch pension contracts and lessons for other countries

2018 ◽  
Vol 18 (3) ◽  
pp. 331-346 ◽  
Author(s):  
LANS BOVENBERG ◽  
THEO NIJMAN
Keyword(s):  
Financial Risk ◽  
Contract Design ◽  
Retirement Income ◽  
Financial Assets ◽  
Defined Benefit ◽  
Defined Contribution ◽  
Occupational Pensions ◽  
Systematic Risks ◽  
Recent Developments ◽  
Insurance Decisions

AbstractThis paper summarizes recent developments in Dutch occupational pensions of both the defined contribution and defined benefit (DB) types. A reform of DB schemes is discussed that introduces financial assets as individual entitlements. At the same time, the reformed schemes derive (dis)saving, financial risk management and insurance decisions from the explicit objective of adequate and stable lifelong retirement income. The proposed system also involves an insurance contract pooling longevity risks and possibly collective buffers that share systematic risks with future pension savers. The paper identifies the strengths and weaknesses of the Dutch contract design and draws lessons for other countries.

Required Minimum Distributions

2020 ◽  
Vol 52 (4) ◽  
pp. 127-137
Author(s):  
John G. Kilgour
Keyword(s):  
Life Expectancy ◽  
Internal Revenue Service ◽  
Retirement Income ◽  
Defined Contribution ◽  
Next Generation ◽  
Retirement Plans ◽  
Internal Revenue ◽  
Individual Requirement

Required minimum distributions (RMDs) are an important part of individual requirement accounts and defined-contribution retirement plans including 401(k), 403(b) and 457(b) plans. Such plans are intended to provide retirement income for the account owner and his or her spouse. They are not intended to pass untaxed wealth on to the next generation. RMDs do that by requiring that a portion of the balance in an account is distributed (and taxed) each year beginning by age 70½ (recently extended to age 72). This article examines the origins and extensions of RMDs, how they are calculated and how they work. It then assesses the recently enacted SECURE Act and the proposed updated Internal Revenue Service tables of the life-expectancy factors used to calculate the amount of the annual RMDs.

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