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on Utility Models and Prospect Theory |
| By: | Kocher, Martin G.; Pahlke, Julius; Trautmann, Stefan T. |
| Abstract: | We study the effects of time pressure on risky decisions for pure gain prospects, pure loss prospects, and mixed prospects involving both gains and losses. In an experiment we find that risk aversion for gains is robust under time pressure whereas risk seeking for losses turns into risk aversion under time pressure. For mixed prospects, subjects become more loss averse and more gain seeking under time pressure, depending on the framing of the prospects. The results suggest the importance of aspiration levels under time pressure. We discuss the implications of our findings for decision making situations that involve time pressure. |
| Keywords: | time pressure; risky decisions; risk aversion; loss aversion; gain seeking; aspiration level |
| JEL: | C91 D81 |
| Date: | 2011–04 |
| URL: | http://d.repec.org/n?u=RePEc:lmu:muenec:12221&r=upt |
| By: | Charles M. Harvey (University of Houston); Lars Peter Østerdal (Department of Economics, University of Copenhagen) |
| Abstract: | Events that occur over a period of time can be described either as sequences of outcomes at discrete times or as functions of outcomes in an interval of time. This paper presents discounting models for events of the latter type. Conditions on preferences are shown to be satisfied if and only if the preferences are represented by a function that is an integral of a discounting function times a scale defined on outcomes at instants of time. |
| Keywords: | continuous time; integral discounting; integral value or utility function |
| Date: | 2011–04 |
| URL: | http://d.repec.org/n?u=RePEc:kud:kuiedp:1112&r=upt |
| By: | Christophe Boucher (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, A.A.Advisors-QCG - ABN AMRO); Bertrand Maillet (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, A.A.Advisors-QCG - ABN AMRO, EIF - Europlace Institute of Finance) |
| Abstract: | We provide an economic valuation of the riskiness of risk models by directly measuring the impact of model risks (specification and estimation risks) on VaR estimates. We find that integrating the model risk into the VaR computations implies a substantial minimum correction of the order of 10-40% of VaR levels. We also present results of a practical method - based on a backtesting framework - for incorporating the model risk into the VaR estimates. |
| Keywords: | Model risk, quantile estimation, VaR, Basel II validation test. |
| Date: | 2011–03 |
| URL: | http://d.repec.org/n?u=RePEc:hal:cesptp:halshs-00587779&r=upt |