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Strategic uncertainty and probabilistic sophistication

Aoyagi, Masaki; Masuda, Takehito; Nishimura, Naoko - 2021

This paper uses laboratory experiments to study subjects’ assessment of uncertainty resulting from strategic and non-strategic decisions of other players. Nonstrategic events are defined by the colors of balls drawn from urns, whereas strategic events are defined by the action choice in Stag...

Persistent link: https://www.econbiz.de/10012488822

Does smooth ambiguity matter for asset pricing?

Gallant, A. Ronald; Jahan-Parvar, Mohammad R.; Liu, Hening - 2018

models featuring smooth ambiguity preferences. We rely on semi-nonparametric estimation of a flexible auxiliary model in our … pricing models with smooth ambiguity. Statistical model comparison shows that models with ambiguity, learning and time …

Persistent link: https://www.econbiz.de/10011780610

Belief-neutral efficiency in financial markets

Beißner, Patrick; Riedel, Frank - 2025

Heterogeneous beliefs among market participants can lead to questionable speculative trading that goes beyond any risk-sharing motives. We demonstrate that such unwarranted betting behavior in market equilibrium can be mitigated by introducing nonlinear pricing for ambiguous contracts, without...

Persistent link: https://www.econbiz.de/10015272951

Sticky Information Diffusion and the Inertial Behavior of Durables Consumption

Luo, Yulei - 2012

This paper studies the dynamics of durable and nondurable consumption under two alternative assumptions about information updating by households – rational inattention and sticky expectations. We first show that the two types of sticky information diffusion can help generate strong excess...

Persistent link: https://www.econbiz.de/10013115894

Sticky Information Diffusion and the Inertial Behavior of Durable Consumption

Luo, Yulei - 2013

This paper studies the aggregate dynamics of durable and nondurable consumption under sticky information diffusion (SID) due to noisy observations and slow learning within the permanent income framework. We show that SID can significantly improve the model's predictions on the joint behavior of...

Persistent link: https://www.econbiz.de/10013085573

The reservation wage under CARA and limited borrowing

Bauer, Christian - 2009

A continuous-time sequential job search model with savings and CARA preferences is solved analytically without resorting to unlimited borrowing and real-valued consumption. I isolate the effects of limited borrowing and nonnegative consumption as well as risk-aversion on the reservation wage by...

Persistent link: https://www.econbiz.de/10003951742

Optimal stopping under ambiguity in continuous time

Riedel, Frank - 2010

We develop a theory of optimal stopping problems under ambiguity in continuous time. Using results from (backward … from the agent's ambiguity aversion. We show how to use these general results for search problems and American Options …. -- Optimal stopping ; Ambiguity ; Uncertainty aversion ; Robustness ; Continuous time ; Optimal control …

Persistent link: https://www.econbiz.de/10003964862

Exercise strategies for American exotic options under ambiguity

Chudjakow, Tatjana; Vorbrink, Jörg - 2009

from the perspective of an ambiguity averse buyer in a discrete time model of Cox-Ross-Rubinstein style. The multiple prior … maker needs to solve a stopping problem. Unlike the classical approach ambiguity averse decision maker uses a class of …-driven claims. -- Worst-case measure ; Ambiguity aversion ; Binomial methods ; American exotic options ; Optimal exercise …

Persistent link: https://www.econbiz.de/10003921365

American options with multiple priors in continuous time

Vorbrink, Jörg - 2011

strategies form the perspective of an ambiguity averse buyer. The multiple prior setting relaxes the presumption of a known …

Persistent link: https://www.econbiz.de/10008990920

Optimal stopping with dynamic variational preferences

Engelage, Daniel - 2009

We consider optimal stopping problems in uncertain environments for an agent assessing utility by virtue of dynamic variational preferences as in [15] or, equivalently, assessing risk by dynamic convex risk measures as in [4]. The solutionis achieved by generalizing the approach in...

Persistent link: https://www.econbiz.de/10003878489