Realized divergence gauges the distinct realized moments associated with time-varying uncertainty and is tradeable with divergence swaps engineered from delta-hedged option portfolios. Consistently with established notions of symmetry in arbitrage-free option markets, implied divergence...

Probabilistic preference models predict that a subject makes different choices with different probabilities in repeatedly experiments with the same stimuli. This paper explains why. First, we prove that a gamble is a statistical ensemble or sample function of a random field with canonical...

This paper extends decision making under risk and uncertainty to group theory via representations of invariant behavioural space for prospect theory. First, we predict that canonical specifications for value functions, probability weighting functions, and stochastic choice maps are homomorphic....

We derive critical values for the violation area in Nth order Almost Stochastic Dominance based on the Nth degree coefficient of relative risk aversion of reasonable utility functions. Our critical values are consistent with existing experimental estimates but apply for a broader range of choice...

Various concepts appeared in the existing literature to evaluate the risk exposure of a financial or insurance firm/subsidiary/line of business due to the occurrence of some extreme scenarios. Many of those concepts, such as Marginal Expected Shortfall or Tail Conditional Expectation, are simply...

We can overcome uncertainty with uncertainty. Using randomness in our choices and in what we control, and hence in the decision making process, could potentially offset the uncertainty inherent in the environment and yield better outcomes. The example we develop in greater detail is the...

This paper proposes a new method to introduce coherent risk measures for risks with infinite expectation, such as those characterized by some Pareto distributions. Extensions of the conditional value at risk, the weighted conditional value at risk and other examples are given. Actuarial...

The workforce planning problem of hiring, dismissing and promoting has been the perennial difficulty of HR management. To cope with uncertain attrition, we propose a new approach of finding a course of action that safeguards against violating organizational target-meeting constraints such as...

This paper attempts to provide a decision-theoretic foundation for the measurement of economic tail risk, which is not only closely related to utility theory but also relevant to statistical model uncertainty. The main result is that the only risk measures that satisfy a set of economic axioms...

In confidence theory, the decision maker relies on statistical regularities from the economic environment to adopt prior beliefs about the probabilities stated on a lottery. Following the confidence principle, by which the weight of the prior in Bayesian inference is proportional to the...