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Risk preference eva...
Risk preference evaluation - a fourth dimension of the application of the Laplace transform
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- Grubbström, Robert W (författare)
- Linköpings universitet,Produktionsekonomi,Tekniska fakulteten,Mediterranean Inst Adv Studies, Slovenia
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(creator_code:org_t)
- 2017-12-06
- 2018
- Engelska.
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Ingår i: International Journal of Production Research. - : TAYLOR & FRANCIS LTD. - 0020-7543 .- 1366-588X. ; 56:1-2, s. 344-373
- Relaterad länk:
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https://urn.kb.se/re...
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https://doi.org/10.1...
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Abstract
Ämnesord
Stäng
- In this paper, we apply the Laplace transform to risk preference theory (decision theory, decision analysis). We show that with a constant measure of absolute risk aversion, the certainty monetary equivalent (CME) can be developed into an expression involving the logarithm of the bilateral Laplace transform of the probability density of the outcome of risky projects. We also introduce a measure named internal risk aversion (IRA). This is in analogy with the earlier application of the transform to net present value problems. Properties of the CME function are examined. Basic examples of application are introduced followed by applications to portfolio theory and option pricing.
Ämnesord
- NATURVETENSKAP -- Data- och informationsvetenskap -- Datavetenskap (hsv//swe)
- NATURAL SCIENCES -- Computer and Information Sciences -- Computer Sciences (hsv//eng)
Nyckelord
- Risk preference; Laplace transform; risk aversion; certainty monetary equivalent; net present value; utility function; CME; NPV; IRA
Publikations- och innehållstyp
- ref (ämneskategori)
- art (ämneskategori)
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