I find asset pricing theory very vague and full of assumptions, especially the consumption-based modern theory. In its essence, the theory states that asset prices depend on the covariance between ...
As the title suggests why is the indifference equations in mean variance portfolio theory convex shaped? Indifference Equation: https://en.wikipedia.org/wiki/Indifference_curve A graph:
Is it possible to infer investor's utility function from the set of decisions she is making? Let's assume for simplicity that the market consists of a single traded asset whose return distribution is ...
I am working on a toy model, in part of which an investor has to decide (based on some utility theory) how much money to invest in a given portfolio. For simplicity, assume that the portfolio is ...
What is the relationship between the axioms of Artzner et al (1999) for coherent risk measures and the axioms of von Neumann-Morgenstern (1944) for the expected utility theory?
Let me give you couple of examples. You're at a dinner and you order something. You could say: "It's OK" "It's good" "It's great" "It's fantastic" "I've never ate something this good" "Goodlike" ...