We report on a laboratory experiment testing for the presence of loss aversion, as separate from risk aversion, utilizing an asset integration protocol designed to ensure that a loss of cash provided by the experimenter is viewed as a real loss by experimental participants. Our experimental...

Even though financial risk management has the ability to generate value, the use of financial derivatives among nonfinancial corporations remains limited. We identify a channel that contributes to this limited use: the decoupling of derivatives losses and operational gains. Specifically, firms...

The financial risk does not only affect the future of a company, but also the dynamic of the economy itself. Therefore, a thorough examination of the risk in the decision-making process of a company represents a substantial aspect. Although research in this direction has been made, most of the...

1. Introduction -- 2. Risk and Risk Perception: Why we are not Rational in the Face of Risk -- 3. Expected Utility, Prospect Theory, and the Allais Paradox: Why Reference Points are Important -- 4. Confirmation Bias and Anchoring Effect: Why the First Piece of Information is Key in Negotiations...

This paper studies risk management decisions for interdependent risk potentially causing catastrophic losses, against which agents typically self-protect (for example, natural catastrophes, cyber risks, pandemic risks). Our model reflects utility loss aversion and interdependent risk, a...