The prospect theory is one of the most popular decision-making theories. It is based on the S-shaped utility function …, unlike the von Neumann and Morgenstern (NM) theory, which is based on the concave utility function. The S-shape brings in … mathematical challenges: simple extensions and generalizations of NM theory into the prospect theory cannot be frequently achieved …

reduction (self-protection) so that correlation becomes endogenous. If prevention concerns only one risk, introducing a second … exogenous risk increases the level of prevention expenditures, even if correlation is negative. If prevention expenditures may … increased dependence increases aggregate prevention expenditures, but not necessarily prevention expenditures for each risk due …

preferences. Full insurance cannot be rejected. As the risk-sharing as-if-complete-markets theory might predict, estimated risk …We show how to use panel data on household consumption to directly estimate households’ risk preferences. Specifically …, we measure heterogeneity in risk aversion among households in Thai villages using a full risk-sharing model, which we …

This paper specifies a model of hierarchical planning under risk with imprecise probabilities and utilities. The model … is then used to explain how agents might act in ways that are both risk averse and risk avid (i.e. risk seeking) …

We examine the optimal saving decision of individuals who face a multiplicative risk. An individual is defined to be … multiplicative risk prudent if multiplying a pure risk to her future wealth raises her optimal savings. We show that an individual is … multiplicative risk prudent if and only if her relative risk prudence uniformly exceeds two. Our result suggests a more restrictive …

represented by the expected utility with uncertainty (EUUP) theory advocated by Izhakian (2017). The economic premium principle of …

I present a theory of financial contracts that transfer risk from one party to another. Risk reduction is equivalent to …. Adding outside noise is the inverse operation and it increases risk, while noise in the sense of a mean-preserving spread is … hedges and insurance contracts, describe the sharing of risk in equilibrium models of financial markets, and characterize …