Risk aversion indivisible timing options and gambling

Gambles with Prices, Operational Measure of Riskiness and ...

In this paper we model the behavior of a risk averse agent who seeks to maximize expected utility and who has a timing option over when to sell an indivisible asset. Our first contribution is to show that, contrary to intuition, optimal behavior for such a risk averse agent can include risk increasing gambles. RiskAversion,IndivisibleTimingOptionsandGambling or stock price risk. The results have wider implications for the modeling and interpretation of portfolio optimization problems involving American style timing decisions. Keywords and Phrases: Timing option, American options, Optimal stopping, dynamic pro-gramming, Gambling, Incomplete markets, Portfolio choice, Sequential lotteries. A note on irreversible investment, hedging and optimal ...

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As noted above, the degree of risk aversion that is appropriate can depend on the asset position of the decision making entity, and R represents the degree of risk aversion. As R becomes larger, the utility function displays less risk aversion. (In fact, when R approaches in¯ nity, the decision maker becomes risk neutral.) Option-Implied Risk Aversion Estimates Option-Implied Risk Aversion Estimates ROBERT R. BLISS and NIKOLAOS PANIGIRTZOGLOU* ABSTRACT Using a utility function to adjust the risk-neutral PDF embedded in cross-sections of options, we obtain measures of the risk aversion implied in option prices. Using FTSE 100 and S&P 500 options, and both power and Time Varying Risk Aversion - Booth School of Business

Работа по теме: david_Introduction_to_behavioral_economics. Глава: Risk Aversion, Risk Loving, and Loss Aversion. ВУЗ: НИУ ВШЭ.

11 References Henderson V and Hobson D (2014), “Risk aversion, indivisible timing options, and gambling”, Operations Research, 61, 126-137. Holt C A and Laury S K (2002), “Risk aversion and incentive effects”, American Economic Review, 92, 1644–1655. Publications and Preprints - University of Warwick Risk aversion, indivisible timing options, and gambling. Co-author: V. Henderson. Operations Research 61, Issue 1, 126-137, Jan-Feb 2013. Maximising functionals of the joint law of the maximum and terminal value in the Skorokhod embedding problem. Co-author: M. Klimmek. arXiv:1012.3909 Annals of Applied Probability Vol. 23, No. 5, p2020-2052 2013. Risk aversion - Wikipedia

Downloadable! In this paper we model the behavior of a risk-averse agent who seeks to maximize expected utility and who has an indivisible asset and a timing option over when to sell this asset. Our main contribution is to show that, contrary to intuition, optimal behavior for such a risk-averse agent can include risk-increasing gambles. For example, a manager with a choice over when to

V., Hobson, D., 2013. Risk Aversion, Indivisible Timing Options, and Gambling. OPERATIONS RESEARCH 61, 126-137 ... Operational risk assessments by supply ...

clining risky asset profile over the life time, as their option is either exercised or ... First, educational investment is indivisible (one cannot get one quarter of an MBA). ... the risk-aversion and the risk-seeking effects attenuate with investors' age, and ...... together with the presence of alternative opportunities, such as gambling ...

Mar 19, 2012 ... Given the assumption of risk aversion, the standard model of consumer choice cannot ..... purchasers have pondered what different indivisible goods they .... time preference rate, no-gambling solution is almost surely suboptimal. ... option C no longer offers this advantage; K&T label this “certainty effect”. Gambling, Saving, and Lumpy Expenditures: Sports Betting in ... - IMTFI Nov 23, 2016 ... Demand for large and indivisible, or “lumpy”, expenditures creates need for liquid - ity. ..... payoffs and a wider range of betting options than have previously been available. .... time preferences away from saving, the distinguishing feature of ...... individual's risk aversion in that it defines how steep or flat an ... Risk Aversion, Indivisible Timing Options and Gambling