What does it mean for an agent faced with choice under uncertainty to “know” something? While a variety of mathematical methods are available to construct formal models to answer this question, the combination of different approaches may lead to unsettling paradoxes. I propose a unified...

Since Kahneman and Tversky (1979), it has been generally recognized that decision makers overweight low probabilities and underweight high probabilities. Of the several weighting functions that have been proposed, that of Prelec (1998) has the attractions that it is parsimonious, consistent with...

We show that preference-homogeneity and loss-aversion are necessary and sufficient for the value function to have the power form with identical powers for gains and losses and for the probability weighting functions for gains and losses to be identical

Climate change is predicted to substantially alter forest growth. Optimally, forest owners should take these future changes into account when making rotation decisions today. However, the fundamental uncertainty surrounding climate change makes predicting these shifts hard. Hence, this paper...

Stochastic independence (SI) has a complex status in probability theory. It is not part of the definition of a probability measure, but it is nonetheless an essential property for the mathematical development of this theory, hence a property that any theory on the foundations of probability...

A natural way to obtain information about the concentration and dispersion of an expert's beliefs is to ask for a confidence interval. Our objective is to design an elicitation mechanism that rewards the expert on the basis of the realized event and satisfies a set of desirable properties. We...

This paper axiomatizes static and dynamic quantile preferences. Static quantile preferences specify that a prospect should be preferred if it has a higher τ-quantile, for some τ ∈ (0,1), while its dynamic counterpart extends this to take into account a sequence of decisions and information...

We show that Risk parity and risk-based models in general can be rationalized as an optimal decision under ambiguity. Risk-based framework represents an extension of Maximum diversification approach of Choueifaty and Coignard (2008) in the presence of ambiguity in risk-adjusted expected returns

Portfolio managers are rarely able to express views on expected returns in a quantitative way. This paper tackles this issue by proposing a simple framework which allows these views to be part of an efficient portfolio construction process. This approach accommodates both a wide range of...

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...