Nowadays many employers offer their employees the possibility of an insurance against too large losses in income when retiring or becoming disabled. This paper models the optimization problem of the employer when setting up such a so-called pension fund. not surprisingly, it turns out that the...

This note proposes the Burr utility function. Burr utility is a flexible two-parameter family that behaves approximately power-like (CRRA) remote from the origin, while exhibiting exponential-like (CARA) features near the origin. It thus avoids the extreme behavior of the power family near the...

In the context of extreme climate change, we ask how to conduct expected utility analysis in the presence of catastrophic risks. Economists typically model decision making under risk and uncertainty by expected util- ity with constant relative risk aversion (power utility); statisticians typi-...

In this paper we propose a new rule to allocate risk capital to portfolios or divisions within a firm. Specifically, we determine the capital allocation that minimizes the excesses of sets of portfolios in lexicographical sense. The excess of a set of portfolios is defined as the expected loss...

Abstract: Little is known about how different bonus schemes affect traders’ propensity to trade and which bonus schemes improve traders’ performance. We study the effects of linear versus threshold (convex) bonus schemes on traders’ behavior. Traders purchase and sell shares in an...

A positive relation between confidence and effort/investment provision has been<br/>theoretically justified and practically assumed in the literature, but has not been<br/>thoroughly investigated. We test and confirm this positive relation between direct<br/>measures of confidence and choice of effort or...