The design of pension contracts: on the perspective of customers

2018 ◽  
Vol 13 (2) ◽  
pp. 219-240 ◽  
Author(s):  
Zhaoxun Mei
Keyword(s):  
Young People ◽  
Utility Theory ◽  
Asset Price ◽  
Expected Utility Theory ◽  
Cumulative Prospect Theory ◽  
The Other ◽  
Risky Assets ◽  
Distribution Rule ◽  
Similar Product ◽  
Guarantee Rate

AbstractThis paper introduces a new pension contract which provides a smoothed return for the customer. The new contract protects customers from adverse asset price movements while keeping the potential of positive returns. It has a transparent structure and clear distribution rule, which can be easily understood by the customer. We compare the new contract to two other contracts under Cumulative Prospect Theory (CPT); one has a similar product structure but without guarantees and the other provides the same guarantee rate but with a different structure. The results show that the new contract is the most attractive contract for a CPT-maximising customer. Yet, we find different results if we let the customer be an Expected Utility Theory-maximising one. Moreover, this paper presents the static optimal portfolio for an individual customer. The results conform to the traditional pension advice that young people should invest more of their money in risky assets while older people should put more money in less risky assets.

scholarly journals From expected utility theory to prospect theory: tracking down the experimental path after forty years

2020 ◽  
Vol 30 (4) ◽  
Author(s):  
Sławomir Kalinowski
Keyword(s):  
Experimental Study ◽  
Prospect Theory ◽  
Expected Utility ◽  
Research Program ◽  
Utility Theory ◽  
Scientific Research ◽  
Expected Utility Theory ◽  
Cumulative Prospect Theory ◽  
The Other ◽  
Scientific Research Program

The article is an experimental study testing the expected utility theory axioms. Three of the experiments are a repetition of a previous test, while the other two are original. The repeated experiments were performed in slightly changed circumstances. The participants were incentivised with rewards, which did not happen in the tree replicated tests. The results confirmed degeneration of the expected utility theory as a scientific research program. The evidence that emerged from the tests supported the hypothesis on the cumulative prospect theory predicting facts not forecasted by the EUT.

scholarly journals Cumulative Prospect Theory Version with Fuzzy Values of Outcome Estimates

Risks ◽  
2021 ◽  
Vol 9 (4) ◽  
pp. 72
Author(s):  
Oleg Uzhga-Rebrov ◽  
Peter Grabusts
Keyword(s):  
Prospect Theory ◽  
Expected Utility ◽  
Utility Theory ◽  
Expected Utility Theory ◽  
Cumulative Prospect Theory ◽  
Development History ◽  
Decisions Under Risk ◽  
History Of ◽  
Main Factors ◽  
Theoretical Foundations

Choosing solutions under risk and uncertainty requires the consideration of several factors. One of the main factors in choosing a solution is modeling the decision maker’s attitude to risk. The expected utility theory was the first approach that allowed to correctly model various nuances of the attitude to risk. Further research in this area has led to the emergence of even more effective approaches to solving this problem. Currently, the most developed theory of choice with respect to decisions under risk conditions is the cumulative prospect theory. This paper presents the development history of various extensions of the original expected utility theory, and the analysis of the main properties of the cumulative prospect theory. The main result of this work is a fuzzy version of the prospect theory, which allows handling fuzzy values of the decisions (prospects). The paper presents the theoretical foundations of the proposed version, an illustrative practical example, and conclusions based on the results obtained.

Inconsistent Bond Pricing in a Rational Market

2016 ◽  
Vol 19 (03) ◽  
pp. 1650017 ◽  
Author(s):  
Hong-Yi Chen ◽  
Hsiao-Yin Chen
Keyword(s):  
Expected Utility ◽  
Utility Theory ◽  
Value Function ◽  
Weighting Function ◽  
Expected Utility Theory ◽  
Cumulative Prospect Theory ◽  
Bond Pricing ◽  
Bond Rating ◽  
Rational Models ◽  
The Value Function

This study proposes two rational models to reconcile the enigma regarding the inconsistent bond pricing that results among bonds with the same ratings. First, we apply a nonlinear utility function to the expected utility theory and observe different expected utilities for senior bonds and subordinated bonds with the same bond rating. Second, we implement the cumulative prospect theory to demonstrate that the inconsistency occurs when the effect on the convexity of the value function dominates the effect on the overweightness of the weighting function. The two models demonstrate that rather than using the notching policy to explain bond pricing, the inconsistent bond pricing can exist under rational market conditions.

Methods of Countering Cyber Recruitment (Iraq Model)

2019 ◽  
pp. 196
Author(s):  
Hind Mohammed Abdul Jabbar Ali
Keyword(s):  
Social Justice ◽  
Young People ◽  
Young Men ◽  
The Other ◽  
The Internet ◽  
Information Network ◽  
Political Repression ◽  
Electronic Information ◽  
Terrorist Organizations ◽  
Other Hand

Connecting to the  electronic information network (internet) became the most characteristic that distinguish this era However , the long hours which young men daily spend on the internet On the other hand ,there are many people who are waiting for the chance to talk and convince them with their views This will lead the young people to be part in the project of the “cyber armies “that involved with states and terrorist organizations  This project has been able  to recruitment hundreds of people every day to work in its rank . It is very difficult to control these websites because we can see the terrorist presence in all its forms in the internet   In addition there are many incubation environments that feed in particular the young people minds                                                                                         Because they are suffering from the lack of social justice Also the unemployment, deprivation , social and political repression So , that terrorist organizations can attract young people through the internet by convincing them to their views and ideas . So these organizations will enable to be more  stronger.

Norm-Endorsement Utilitarianism and the Nature of Utility

1996 ◽  
Vol 12 (2) ◽  
pp. 165-182 ◽  
Author(s):  
Jonathan Baron
Keyword(s):  
Expected Utility ◽  
Utility Theory ◽  
Expected Utility Theory ◽  
Interpersonal Comparison ◽  
Moral Norms ◽  
Moral Principles ◽  
Future Goals ◽  
Equal Consideration

In this article, I shall suggest an approach to the justification of normative moral principles which leads, I think, to utilitarianism. The approach is based on asking what moral norms we would each endorse if we had no prior moral commitments. I argue that we would endorse norms that lead to the satisfaction of all our nonmoral values or goals. The same approach leads to a view of utility as consisting of those goals that we would want satisfied. In the second half of the article, I examine the implication of this view for several issues about the nature of utility, such as the use of past and future goals. The argument for utilitarianism is not completed here. The rest of it requires a defense of expected-utility theory, of interpersonal comparison, and of equal consideration (see Baron, 1993; Broome, 1991).

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