This paper summarizes the major events in the recent history of modelling human decisions under risk. After presenting the basics of expected utility theory, the key pieces of evidence are described which showed that under certain circumstances, this theory is not descriptively valid. The most...

The relatively new stream of research on various types of utilities is reviewed and discussed together with some of its implications. The distinction is explained among experienced utility, remembered utility and predicted utility as three candidates for decision utility. Examples of selected...

This paper pits expected utility theory and cumulative prospect theory against each other as regards their descriptive accuracy. Some older as well as newer pieces of evidence are described which show that under certain circumstances, expected utility theory is not descriptively valid. The most...

We simulate how the probability of failure of a subsidiary and the group changes after a capital buffer is imposed on the group as a whole and/or the subsidiary. The simulation takes into account the relative sizes of the parent and the subsidiary, the parent’s share in the subsidiary, the...

The paper argues that the prices of financial instruments contain usefulinformation about the development of different macroeconomic variables. Itsfocus lies in examining the ability of stock prices and of spread betweenlong and shor interest rates to predict real economic activity. We...