Economic And Financial Decisions Under Risk

An understanding of risk and how to deal with it is an essential part of modern economics. Whether liability litigation for pharmaceutical firms or an individual's having insufficient wealth to retire, risk is something that can be recognized, quantified, analyzed, treated--and incorporated into our decision-making processes. This book represents a concise summary of basic multiperiod decision-making under risk. Its detailed coverage of a broad range of topics is ideally suited for use in advanced undergraduate and introductory graduate courses either as a self-contained text, or the introductory chapters combined with a selection of later chapters can represent core reading in courses on macroeconomics, insurance, portfolio choice, or asset pricing. The authors start with the fundamentals of risk measurement and risk aversion. They then apply these concepts to insurance decisions and portfolio choice in a one-period model. After examining these decisions in their one-period setting, they devote most of the book to a multiperiod context, which adds the long-term perspective most risk management analyses require. Each chapter concludes with a discussion of the relevant literature and a set of problems. The book presents a thoroughly accessible introduction to risk, bridging the gap between the traditionally separate economics and finance literatures.

This handbook in two parts covers key topics of the theory of financial decision making. Some of the papers discuss real applications or case studies as well. There are a number of new papers that have never been published before especially in Part II.Part I is concerned with Decision Making Under Uncertainty. This includes subsections on Arbitrage, Utility Theory, Risk Aversion and Static Portfolio Theory, and Stochastic Dominance. Part II is concerned with Dynamic Modeling that is the transition for static decision making to multiperiod decision making. The analysis starts with Risk Measures and then discusses Dynamic Portfolio Theory, Tactical Asset Allocation and Asset-Liability Management Using Utility and Goal Based Consumption-Investment Decision Models.A comprehensive set of problems both computational and review and mind expanding with many unsolved problems are in an accompanying problems book. The handbook plus the book of problems form a very strong set of materials for PhD and Masters courses both as the main or as supplementary text in finance theory, financial decision making and portfolio theory. For researchers, it is a valuable resource being an up to date treatment of topics in the classic books on these topics by Johnathan Ingersoll in 1988, and William Ziemba and Raymond Vickson in 1975 (updated 2 nd edition published in 2006).

Financial Dec Making under Uncertainty

A comprehensive analysis of the macroeconomic and financial forces altering the economic landscape Financial decision-making requires one to anticipate how their decision will not only affect their business, but also the economic environment. Unfortunately, all too often, both private and public sector decision-makers view their decisions as one-off responses and fail to see their decisions within the context of an evolving decision-making framework. In Decision-Making in a Dynamic Economic Setting, John Silvia, Chief Economist of Wells Fargo and one of the top 5 economic forecasters according to Bloomberg News and USA Today, skillfully puts this discipline in perspective. Details realistic, decision-making approaches and applications under a broad set of economic scenarios Analyzes monetary policy and addresses the impact of financial regulations Examines business cycles and how to identify economic trends, how to deal with uncertainty and manage risk, the building blocks of growth, and strategies for innovation Decision-Making in a Dynamic Economic Setting details the real-world application of economic principles and financial strategy in making better business decisions.

The need to understand the theories and applications of economic and finance risk has been clear to everyone since the financial crisis, and this collection of original essays proffers broad, high-level explanations of risk and uncertainty. The economics of risk and uncertainty is unlike most branches of economics in spanning from the individual decision-maker to the market (and indeed, social decisions), and ranging from purely theoretical analysis through individual experimentation, empirical analysis, and applied and policy decisions. It also has close and sometimes conflicting relationships with theoretical and applied statistics, and psychology. The aim of this volume is to provide an overview of diverse aspects of this field, ranging from classical and foundational work through current developments. Presents coherent summaries of risk and uncertainty that inform major areas in economics and finance Divides coverage between theoretical, empirical, and experimental findings Makes the economics of risk and uncertainty accessible to scholars in fields outside economics

This book sheds light on the emotional side of risk taking behaviour using an innovative cross-disciplinary approach, mixing financial competences with psychology and affective neuroscience. In doing so, it shows the implications for market participants and regulators in terms of transparency and communication between intermediaries and customers.

This book uses real-world examples to show how individual and collective risks can be blended and treated in a reliable decision-making framework that draws its inspiration from decision theory and market based mechanisms. It then goes into deeper detail by looking at the implications of having to face risks (a) where some kind of probabilistic description is available and (b) where none is available, using the example of insurable risks vs non-insurable risks. Again, by using real-world examples it shows how decision-makers can cope with such situations by a proper understanding and use of modern financial techniques.

Updates and advances the theory of expected utility as applied to risk analysis and financial decision making.

This book reviews the latest research from psychology, neuroscience, and behavioral economics evaluating how people make financial choices in real-life circumstances. The volume is divided into three sections investigating financial decision making at the level of the brain, the level of an individual decision maker, and the level of the society, concluding with a discussion of the implications for further research. Among the topics discussed: Neural and hormonal bases of financial decision making Personality, cognitive abilities, emotions, and financial decisions Aging and financial decision making Coping methods for making financial choices under uncertainty Stock market crashes and market bubbles Psychological perspectives on borrowing, paying taxes, gambling, and charitable giving Psychological Perspectives on Financial Decision Making is a useful reference for researchers both in and outside of psychology, including decision-making experts, consumer psychologists, and behavioral economists.

"The fundamental topic of choice thory- how do economic agents decide when faces with a situalion of risk- and its accompanying theoretical models are here dissected and analyzed. Using a textbook style, the authors present the microfoundations of risk, uncertainty and its management with specific application to insurance and finance. The book analyzes the formal evalustion of risky situations, analyzes individual decisions under uncertainty and determines the markets for risk, including market incompleteness and risk transfer and welfar..."