When financial securities are modeled as claims on stochastic processes, each trader's beliefs at time can be summarized by a subjective probability distribution . The dominant Rational Expectations approach typically treats as a singleton that correctly gauges risks. In reality, financial risks...

It is often easier to identify agents’ preferences for action, holding probabilities fixed, than to delineate all the possible consequences of actions. Under what conditions can such preferences be formulated as if agents maximize expected utility? As Green and Osband (1991) noted,...