Risk aversion is one of the main themes in risk theory. Risk theory is treated usually by probability theory. The aim of this paper is to propose an approach of the risk aversion by possibility theory initiated by Zadeh in 1978 as an alternative of probability theory in the modeling of uncertain situations. The main notions studied in this paper are the possibilistic risk premium and the possib...

Artificial stock markets are models of financial markets used to study and understand market dynamics. Agent Based Artificial Stock Markets can be seen as any market model in which prices are formed endogenously as a result of participants’ interaction and in which the representation of participants varies from simple equations of forecast functions to intricate software components endowed with...

A challenge to models of equilibrium indeterminacy based on increasing returns is that required increasing returns for generating indeterminacy can be implausibly large and rise quickly with the relative risk aversion in labor. We show that unsynchronized wage adjustment via a relative wage effect can both lower the required degree of increasing returns for indeterminacy to a plausible level an...

This article presents a new approach for building robust portfolios based on stochastic efficiency analysis, by using the Chance Constrained Data Envelopment Analysis (CCDEA) model and periods of market downturn, i.e. worst-state market. The is able to accommodate investors who exhibit different risk behaviors empirical analysis done assets traded Brazil Stock Exchange, B3 (Brasil, Bolsa, Balcã...

The concept of risk aversion is important in understanding individual behavior as well as many other theoretical issues in finance and economics. This study uses life insurance expenditure data of Survey of Family Income and Expenditure (SFIE) in Taiwan to estimate the Arrow-Pratt risk aversion coefficient of households empirically by using the reduced form equation derived by Halek and Eisenha...

We exhibit three non-standard cases of preference reversal (PR) between choices and valuations of bets. The endowment effect arises as a surprising consequence of the WTA/WTP disparity when the probabilities of winning get close to certainty. We consider a new theory of choice under risk, cognitive consistency (CC) theory, which can predict both standard and non-standard cases of PR, the WTA/WT...

The aim of the present paper is to analyze the link between price rigidity and indeterminacy. This is done within a cash-in-advance economy from which we know that it exhibits indeterminacy at high degrees of relative risk aversion. I Þnd that price stickiness reduces the scope of these sunspot equilibria: sluggish price adjustment requires degrees of relative risk aversion compatible with inde...

In this paper, we study an insurer’s optimal time-consistent strategies under themean–variance criterion with state dependent risk aversion. It is assumed that the surplus process is approximated by a diffusion process. The insurer can purchase proportional reinsurance and invest in a financial market which consists of one risk-free asset andmultiple risky assets whose price processes follow ge...

We address robust mechanism design for bilateral trade of an indivisible commodity, under incomplete information on traders’ private reservation values. Under ex-post individual rationality and ex-post incentive compatibility, we define the notion of ex-post constrained-efficiency. It is weaker than interim constrained efficiency, and it is a notion of constrained optimality that is independent...