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Apportioning of risks via stochastic dominance

Eeckhoudt, Louis; Schlesinger, Harris; Tsetlin, Ilia - 2008

Consider a simple two-state risk with equal probabilities for the two states. In particular, assume that the random wealth variable Xi dominates Yi via ith-order stochastic dominance for i = M,N. We show that the 50-50 lottery [XN + YM, YN + XM] dominates the lottery [XN + XM, YN + YM] via (N +...

Persistent link: https://www.econbiz.de/10010264492

Stochastic Dominance: Convexity and Some Efficiency Tests

Lizyayev, Andrey M. - 2009

This paper points out the importance of Stochastic Dominance (SD) efficient sets being convex. We reviewclassic convexity and efficient set characterization results on SD efficiency of a given portfolio relative to adiversified set of assets and generalize them in the following aspects. First,...

Persistent link: https://www.econbiz.de/10010325820

Does risk aversion accelerate optimal forest rotation under uncertainty?

Alvarez, Luis H. R.; Koskela, Erkki - 2004

We use a Wicksellian single rotation framework to analyze the impact of the intertemporally fluctuating and stochastic mean-reverting interest rate process on the optimal harvesting threshold and thereby the expected length of the rotation period, when forest value is also stochastic following...

Persistent link: https://www.econbiz.de/10010261267

Negative relationship between risk and return: A contrary view

Mahmood, Iqbal; Ali Shah, Syed Zulfiqar - In: Pakistan Journal of Commerce and Social Sciences (PJCSS) 9 (2015) 2, pp. 336-343

finance and prospect theory context have revealed that risk and return are not positively correlated, but are negatively … positively correlated in above target return companies. These findings exhibit that implications of prospect theory with respect … subdivided into five segments or sections, results change and show a mixed pattern. Implications of prospect theory with regard …

Persistent link: https://www.econbiz.de/10011938458

The Uncertain Mortality Intensity Framework: Pricing and Hedging Unit-Linked Life Insurance Contracts

Li, Jing; Szimayer, Alexander - 2010

We study the valuation and hedging of unit-linked life insurance contracts in a setting where mortality intensity is governed by a stochastic process. We focus on model risk arising from different specifications for the mortality intensity. To do so we assume that the mortality intensity is...

Persistent link: https://www.econbiz.de/10010270425

The effect of uncertainty on decision making about climate change mitigation: a numerical approach of stochastic control

Lontzek, Thomas S.; Narita, Daiju - 2009

We apply standardized numerical techniques of stochastic optimization (Judd [1998]) to the climate change issue. The model captures the feature that the effects of uncertainty are different with different levels of agent's risk aversion. A major finding is that the effects of stochasticity...

Persistent link: https://www.econbiz.de/10010277869

Taxes versus quotas for a stock pollutant

Hoel, Michael; Karp, Larry S. - 1998

We compare the effects of taxes and quotas for an environmental problem in which the regulator and polluter have asymmetric information about abatement costs, and the environmental damage depends on the stock of pollution. We thus extend to a dynamic framework previous studies in which...

Persistent link: https://www.econbiz.de/10011608397

Earnings Dispersion, Risk Aversion and Education

Belzil, Christian; Hansen, Jörgen - 2002

We estimate a dynamic programming model of schooling decisions in which the degree of risk aversion can be inferred from schooling decisions. In our model, individuals are heterogeneous with respect to school and market abilities but homogeneous with respect to the degree of risk aversion. We...

Persistent link: https://www.econbiz.de/10010262728

The Lender-Borrower Relationship with Risk Averse Lenders

Pausch, Thilo - 2003

Kreditgeber und Kreditnehmer zeigt die Analyse des optimalen anreizkompatiblen Kreditvertrages, dass Risikoaversion des …

Persistent link: https://www.econbiz.de/10010263002

Limited Liability and the Trade-off between Risk and Incentives

Kräkel, Matthias - 2007

everal empirical findings have challenged the traditional trade-off between risk and incentives. By combining risk aversion and limited liability in a standard principal-agent model the empirical puzzle on the positive relationship between risk and incentives can be explained.

Persistent link: https://www.econbiz.de/10010263185