Diversifiable and Non-diversifiable Risk and the Advanced Choice under Ambiguous or Uncertain Conditions

The objective of this paper is to revisit the concepts of diversifiable and non-diversifiable risk, expound the portfolio risk in two ways: mathematically first, and with practical examples, second It also explains lending and borrowing at the risk-free rate of return, in addition to juxtaposing the diversification method to measure the unsystematic risk against utilizing Beta to measure the systematic risk. Furthermore, it briefly examines the mathematical simulation and sensitivity analysis, and mathematically delineates the technique for choices under risk, ambiguity, and uncertainty. The practical implication of this conceptual paper is to offer a further clarification of theoretical terms, especially those which might be interchangeable in financial and economic literature, and further show, by examples, the terms’ applicability.

Diversifiable and Non-diversifiable Risk and the Advanced Choice under Ambiguous or Uncertain Conditions

The objective of this paper is to revisit the concepts of diversifiable and non-diversifiable risk, expound the portfolio risk in two ways: mathematically first, and with practical examples, second It also explains lending and borrowing at the risk-free rate of return, in addition to juxtaposing the diversification method to measure the unsystematic risk against utilizing Beta to measure the systematic risk. Furthermore, it briefly examines the mathematical simulation and sensitivity analysis, and mathematically delineates the technique for choices under risk, ambiguity, and uncertainty. The practical implication of this conceptual paper is to offer a further clarification of theoretical terms, especially those which might be interchangeable in financial and economic literature, and further show, by examples, the terms’ applicability.

Risk, Ambiguity, and the Value of Diversification

Diversification is a basic economic principle that helps to hedge against uncertainty. It is, therefore, intuitive that both risk aversion and ambiguity aversion should positively affect the value of diversification. In this paper, we show that this intuition (1) is true for risk aversion but (2) is not necessarily true for ambiguity aversion. We derive sufficient conditions, showing that, contrary to the economic intuition, ambiguity and ambiguity aversion may actually reduce the diversification value. This paper was accepted by Manel Baucells, decision analysis.

Two Ambiguities in Object-Oriented Aesthetic Interpretation

The aesthetic theory of Graham Harman’s Object-Oriented Ontology (OOO) revolves around the concept of allure, a nonliteral experience of an object’s displacement from its qualities that draws attention to a deeper reality. But applying allure to aesthetic interpretation is hampered in two ways. First, OOO necessarily moves between the constrained viewpoint of experience and a more global perspective. Yet mixing these “inside” and “outside” views can risk ambiguity. Second, the phenomenological difference between the parts and qualities of an object must be clarified before Harman’s model of wholes and parts can be incorporated into OOO aesthetics. Addressing these two ambiguities will make it possible to further develop OOO’s resources for aesthetic commentary. For instance, one conclusion is that allure itself has two varieties: a tension between the object and its qualities (“allusion”) and a tension between the whole and its parts (“collusion”). These options parallel Harman’s twofold critique of reductionism. Another conclusion is that the literal needs an explanation within the framework of OOO insofar as it is a genuine feature of experience.