The model of rational decision-making in most of economics and statistics is expected utility theory (EU) axiomatised by von Neumann and Morgenstern, Savage and others. This is less the case however in financial economics and mathematical finance, where investment decisions are commonly based on...

Investors are said to "abhor uncertainty", but if there were no uncertainty they could earn only the risk-free rate. A fundamental result in the analytical accounting literature shows that investors buying into a CARA-normal CAPM market pay lower asset prices, earn higher expected returns, and...