scholarly journals An Optimal Investment Returns with N-Step Utility Functions

2016 ◽  
Vol 16 ◽  
pp. 96-104
Author(s):  
Joseph Thomas Eghwerido ◽  
Titilola Obilade
Keyword(s):  
Utility Function ◽  
Capital Market ◽  
Optimal Investment ◽  
Utility Functions ◽  
Design Parameters ◽  
Square Root ◽  
Power Utility ◽  
Market Structures ◽  
Investment Returns ◽  
Negative Exponential

In this paper, we shall validate the optimal payoff of an investment with an N-step utility function, [6, 7], such that H* is the payoff at time N in every possible state say 2n; in an N period market setting. Negative exponential, logarithm, square root and power utility functions were considered as the market structures change according to a Markov chain. These models were used to predict the performances of some selected companies in the Nigeria Capital Market. The estimates for models design parameters p, q, p', q' correspond to halving or doubling of investment. The performance of any utility function is determined by the ratio q: q' of the probability of rising to falling as well as the ratio p: p' of the risk neutral probability measure of rising to the falling.

scholarly journals Optimal Investment with Bounded VaR for Power Utility Functions

2014 ◽  
pp. 103-116
Author(s):  
Bénamar Chouaf ◽  
Serguei Pergamenchtchikov
Keyword(s):  
Optimal Investment ◽  
Utility Functions ◽  
Power Utility

Uncertain Outcomes and Climate Change Policy Using an Expo-Power Utility Function

2020 ◽  
Vol 0 (0) ◽  
Author(s):  
Jules Sadefo Kamdem ◽  
David Akame
Keyword(s):  
Climate Change ◽  
Utility Function ◽  
Environmental Economics ◽  
Climate Change Policy ◽  
Utility Functions ◽  
Relative Risk Aversion ◽  
Power Utility ◽  
Economic Agents ◽  
Change Policy ◽  
Uncertain Outcomes

AbstractThis paper extends the work of Pindyck, R. S. 2012. “Uncertain Outcomes and Climate Change Policy.” Journal of Environmental Economics and Management 63 (3): 289–303. by taking into consideration a large class of different utility functions of economic agents. As in Pindyck, R. S. 2012. “Uncertain Outcomes and Climate Change Policy.” Journal of Environmental Economics and Management 63 (3): 289–303, instead of considering a social utility function that is characterized by constant relative risk aversion (C.R.R.A), we use the expo-power utility function of Saha, A. 1993. “Expo-power Utility: A ‘Flexible’ Form for Absolute and Relative Risk Aversion.” American Journal of Agricultural Economics 75 (4): 905–13. In fact, depending on the choice of the expo-power utility function parameters, we cover a diverse range of utility functions. Apart from covering the other utility functions that a C.R.R.A omits, the Expo-power utility function permits us to discern if under the other utility-regimes of economic agents, the willingness to pay remains more affected by uncertain outcomes than certain outcomes when we vary the expectation and standard deviation of the temperature’s probability distribution. Our paper has maintained the small-tailed gamma distributions of temperature and economic impact of Pindyck, R. S. 2012. “Uncertain Outcomes and Climate Change Policy.” Journal of Environmental Economics and Management 63 (3): 289–303. not only because they hinder infinite future welfare losses (for an exponential utility function), but because it is easy to change some moments of the distribution (jointly or holding the others fixed) while studying how uncertainty influences the willingness to pay as explained in Pindyck, R. S. 2012. “Uncertain Outcomes and Climate Change Policy.” Journal of Environmental Economics and Management 63 (3): 289–303.

scholarly journals Optimal Investment-Consumption Strategy under Inflation in a Markovian Regime-Switching Market

2016 ◽  
Vol 2016 ◽  
pp. 1-17 ◽  
Author(s):  
Huiling Wu
Keyword(s):  
Regime Switching ◽  
Stock Price ◽  
Optimal Investment ◽  
Investment Strategy ◽  
Power Utility ◽  
Optimal Investment Strategy ◽  
Admissible Strategies ◽  
Definition Of ◽  
Markovian Regime Switching ◽  
Optimal Investment And Consumption

This paper studies an investment-consumption problem under inflation. The consumption price level, the prices of the available assets, and the coefficient of the power utility are assumed to be sensitive to the states of underlying economy modulated by a continuous-time Markovian chain. The definition of admissible strategies and the verification theory corresponding to this stochastic control problem are presented. The analytical expression of the optimal investment strategy is derived. The existence, boundedness, and feasibility of the optimal consumption are proven. Finally, we analyze in detail by mathematical and numerical analysis how the risk aversion, the correlation coefficient between the inflation and the stock price, the inflation parameters, and the coefficient of utility affect the optimal investment and consumption strategy.

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 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.

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