Academic literature on the topic 'Expected utility maximization problem'
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Journal articles on the topic "Expected utility maximization problem"
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Müller, Alfred. "Expected utility maximization of optimal stopping problems." European Journal of Operational Research 122, no. 1 (2000): 101–14. http://dx.doi.org/10.1016/s0377-2217(99)00072-7.
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Faidi, Wahid, Hanen Mezghanni, and Mohamed Mnif. "Expected Utility Maximization Problem Under State Constraints and Model Uncertainty." Journal of Optimization Theory and Applications 183, no. 3 (2019): 1123–52. http://dx.doi.org/10.1007/s10957-019-01583-y.
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Lazgham, Mourad. "Regularity properties in a state-constrained expected utility maximization problem." Mathematical Methods of Operations Research 88, no. 2 (2018): 185–240. http://dx.doi.org/10.1007/s00186-018-0634-4.
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Lottenbach, Hans. "Expected utility and constrained maximization: Problems of compatibility." Erkenntnis 41, no. 1 (1994): 37–48. http://dx.doi.org/10.1007/bf01128909.
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KALLSEN, JAN, and JOHANNES MUHLE-KARBE. "UTILITY MAXIMIZATION IN AFFINE STOCHASTIC VOLATILITY MODELS." International Journal of Theoretical and Applied Finance 13, no. 03 (2010): 459–77. http://dx.doi.org/10.1142/s0219024910005851.
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We consider the classical problem of maximizing expected utility from terminal wealth. With the help of a martingale criterion explicit solutions are derived for power utility in a number of affine stochastic volatility models.
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Sekine, Jun. "A note on long-term optimal portfolios under drawdown constraints." Advances in Applied Probability 38, no. 03 (2006): 673–92. http://dx.doi.org/10.1017/s0001867800001221.
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The maximization of the long-term growth rate of expected utility is considered under drawdown constraints. In a general situation, the value and the optimal strategy of the problem are related to those of another ‘standard’ risk-sensitive-type portfolio optimization problem. Furthermore, an upside-chance maximization problem of a large deviation probability is stated as a ‘dual’ optimization problem. As an example, a ‘linear-quadratic’ model is studied in detail: the conditions to ensure the solvabilities of the problems are discussed and explicit expressions for the solutions are presented.
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Sekine, Jun. "A note on long-term optimal portfolios under drawdown constraints." Advances in Applied Probability 38, no. 3 (2006): 673–92. http://dx.doi.org/10.1239/aap/1158684997.
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The maximization of the long-term growth rate of expected utility is considered under drawdown constraints. In a general situation, the value and the optimal strategy of the problem are related to those of another ‘standard’ risk-sensitive-type portfolio optimization problem. Furthermore, an upside-chance maximization problem of a large deviation probability is stated as a ‘dual’ optimization problem. As an example, a ‘linear-quadratic’ model is studied in detail: the conditions to ensure the solvabilities of the problems are discussed and explicit expressions for the solutions are presented.
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Popovici, Elena. "Co-Optimization Free Lunches: Tractability of Optimal Black-Box Algorithms for Maximizing Expected Utility." Evolutionary Computation 26, no. 1 (2018): 145–75. http://dx.doi.org/10.1162/evco_a_00208.
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Co-optimization problems often involve settings in which the quality ( utility) of a potential solution is dependent on the scenario within which it is evaluated, and many such scenarios exist. Maximizing expected utility is simply the goal of finding the potential solution whose expected utility value over all possible scenarios is best. Such problems are often approached using coevolutionary algorithms. We are interested in the design of generally well-performing black-box algorithms for this problem, that is, algorithms which have access to the utility function only via input–output queries. We research this matter by focusing on three main questions: 1) are some algorithms strictly better than others when judged in aggregation over all possible instances of the problem? that is, is there “free lunch”? 2) do optimal algorithms exist? and 3) if so, do they have a tractable implementation? For a specific expected-utility maximization context, involving several assumptions and performance choices, we answer all three questions affirmatively and concretely: we provide examples of free lunch; we describe the general operation of optimal algorithms; we characterize situations when this operation has a very simple and efficient implementation, situations when the computational cost can be significantly reduced, and situations when tractability of optimal algorithms might be out of reach.
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BLANCHET-SCALLIET, CHRISTOPHETTE, ETIENNE CHEVALIER, IDRIS KHARROUBI, and THOMAS LIM. "MAX–MIN OPTIMIZATION PROBLEM FOR VARIABLE ANNUITIES PRICING." International Journal of Theoretical and Applied Finance 18, no. 08 (2015): 1550053. http://dx.doi.org/10.1142/s0219024915500533.
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In this paper, we study the valuation of variable annuities for an insurer. We concentrate on two types of these contracts, namely guaranteed minimum death benefits and guaranteed minimum living benefits that allow the insured to withdraw money from the associated account. Here, the price of variable annuities corresponds to a fee, fixed at the beginning of the contract, that is continuously taken from the associated account. We use a utility indifference approach to determine the indifference fee rate. We focus on the worst case for the insurer, assuming that the insured makes the withdrawals that minimize the expected utility of the insurer. To compute this indifference fee rate, we link the utility maximization in the worst case for the insurer to a sequence of maximization and minimization problems that can be computed recursively. This allows to provide an optimal investment strategy for the insurer when the insured follows the worst withdrawal strategy and to compute the indifference fee. We finally explain how to approximate these quantities via the previous results and give numerical illustrations of parameter sensitivity.
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Iftimie, Bogdan, Monique Jeanblanc, and Thomas Lim. "Optimization problem under change of regime of interest rate." Stochastics and Dynamics 16, no. 05 (2016): 1650015. http://dx.doi.org/10.1142/s0219493716500155.
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In this paper, we study the problem of maximization of the expected value of the sum of the utility of the terminal wealth and the utility of the consumption, in a case where some sudden jumps in the risk-free interest rate create incompleteness. To solve the problem we use the dual approach. We characterize the value function of the dual problem by a BSDE and the duality between the primal and the dual value functions is exploited to study the BSDE associated to the primal problem.
Dissertations / Theses on the topic "Expected utility maximization problem"
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Feunou, Victor Nzengang. "Essays on Utility maximization and Optimal Stopping Problems in the Presence of Default Risk." Doctoral thesis, Humboldt-Universität zu Berlin, 2018. http://dx.doi.org/10.18452/19323.
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Gegenstand der vorliegenden Dissertation sind stochastische Kontrollprobleme, denen sich Agenten im Zusammenhang mit Entscheidungen auf Finanzmärkten gegenübersehen. Der erste Teil der Arbeit behandelt die Maximierung des erwarteten Nutzens des Endvermögens eines Finanzmarktinvestors. Für den Investor ist eine Beschreibung der optimalen Handelsstrategie, die zur numerischen Approximation geeignet ist sowie eine Stabilitätsanalyse der optimalen Handelsstrategie bzgl. kleinerer Fehlspezifikationen in Nutzenfunktion und Anfangsvermögen, von höchstem Interesse. In stetigen Marktmodellen beweisen wir Stabilitätsresultate für die optimale Handeslsstrategie in geeigneten Topologien.
Für hinreichend differenzierbare Nutzenfunktionen und zeitstetige Marktmodelle
erhalten wir eine Beschreibung der optimalen Handelsstrategie durch die Lösung eines
Systems von stochastischen Vorwärts-Rückwärts-Differentialgleichungen (FBSDEs).
Der zweite Teil der Arbeit beschäftigt sich mit optimalen Stopproblemen für einen Agenten,
dessen Ertragsprozess von einem Ausfallsereignis abhängt. Unser Hauptinteresse gilt der Beschreibung der Lösungen vor und nach dem Ausfallsereignis und damit dem besseren Verständnis des Verhaltens des Agenten bei Auftreten eines Ausfallsereignisses.
Wir zeigen wie sich das optimale Stopproblem in zwei einzelne Teilprobleme zerlegen lässt:
eines, für das der zugrunde liegende Informationsfluss das Ausfallereignis nicht beinhaltet,
und eines, in welchem der Informationsfluss das Ausfallereignis berücksichtigt.
Aufbauend auf der Zerlegung des Stopproblems und der Verbindung zwischen
der Optimalen Stoptheorie und der Theorie von reflektierenden stochastischen Rückwärts-Differentialgleichungen (RBSDEs), leiten wir einen entsprechenden Zerlegungsansatz her,
um RBSDEs mit genau einem Sprung zu lösen. Wir beweisen neue Existenz- und Eindeutigkeitsresultate von RBSDEs mit quadratischem Wachstum.<br>This thesis studies stochastic control problems faced by agents in financial markets when making decisions. The first part focuses on the maximization of expected utility from terminal wealth for an investor trading in a financial market. Of utmost concern to the investor is a description of optimal trading strategy that is amenable to numerical approximation, and
the stability analysis of the optimal trading strategy w.r.t. "small" misspecification in his utility function and initial capital. In the setting of a continuous market model, we prove stability results for the optimal wealth process in the Emery topology and the uniform topology on semimartingales, and stability results for the optimal trading strategy in suitable topologies.
For sufficiently differentiable utility functions, we obtain a description of the optimal trading strategy in terms of the solution of a system of forward-backward stochastic differential equations (FBSDEs). The second part of the thesis deals with the optimal stopping problem
for an agent with a reward process exposed to a default event. Our main concern is to give a description of the solutions before and after the default event and thereby better understand the behavior of the agent in the presence of default. We show how the stopping problem can be decomposed into two individual stopping problems: one with information flow for which the default event is not visible, and another one with information flow which captures the default event. We build on the decomposition of the optimal stopping problem, and the link between the theories of optimal stopping and reflected backward stochastic differential equations (RBSDEs) to derive a corresponding decomposition approach to solve RBSDEs with a single jump. This decomposition allows us to establish existence and uniqueness results for RBSDEs with drivers of quadratic growth.
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Dankyi, Daniel K. "Analysis of life insurance lapses and utility-maximization of shareholders' expected profit." Thesis, City University London, 2001. http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.367262.
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Kramkov, Dimitrij O., and Walter Schachermayer. "Necessary and sufficient conditions in the problem of optimal investment in incomplete markets." SFB Adaptive Information Systems and Modelling in Economics and Management Science, WU Vienna University of Economics and Business, 2001. http://epub.wu.ac.at/1568/1/document.pdf.
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Following [10] we continue the study of the problem of expected utility maximization in incomplete markets. Our goal is to find minimal conditions on a model and a utility function for the validity of several key assertions of the theory to hold true. In [10] we proved that a minimal condition on the utility function alone, i.e. a minimal market independent condition, is that the asymptotic elasticity of the utility function is strictly less than 1. In this paper we show that a necessary and sufficient condition on both, the utility function and the model, is that the value function of the dual problem is finite. (authors' abstract)<br>Series: Working Papers SFB "Adaptive Information Systems and Modelling in Economics and Management Science"
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Peterson, Martin. "Transformative Decision Rules : Foundations and Applications." Doctoral thesis, KTH, Infrastruktur, 2003. http://urn.kb.se/resolve?urn=urn:nbn:se:kth:diva-3512.
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A transformative decision rule alters the representation of a decisionproblem, either by changing the sets of acts and states taken intoconsideration, or by modifying the probability or value assignments.Examples of decision rules belonging to this class are the principleof insufficient reason, Isaac Levi’s condition of E-admissibility, Luceand Raiffa’s merger of states-rule, and the de minimis principle. Inthis doctoral thesis transformative decision rules are analyzed froma foundational point of view, and applied to two decision theoreticalproblems: (i) How should a rational decision maker model a decisionproblem in a formal representation (‘problem specification’, ‘formaldescription’)? (ii) What role can transformative decision rules play inthe justification of the principle of maximizing expected utility?The thesis consists of a summary and seven papers. In Papers Iand II certain foundational issues concerning transformative decisionrules are investigated, and a number of formal properties of this classof rules are proved: convergence, iterativity, and permutability. InPaper III it is argued that there is in general no unique representationof a decision problem that is strictly better than all alternative representations.In Paper IV it is shown that the principle of maximizingexpected utility can be decomposed into a sequence of transformativedecision rules. A set of axioms is proposed that together justify theprinciple of maximizing expected utility. It is shown that the suggestedaxiomatization provides a resolution of Allais’ paradox that cannot beobtained by Savage-style, nor by von Neumann and Morgenstern-styleaxiomatizations. In Paper V the axiomatization from Paper IV is furtherelaborated, and compared to the axiomatizations proposed byvon Neumann and Morgenstern, and Savage. The main results in PaperVI are two impossibility theorems for catastrophe averse decisionrules, demonstrating that given a few reasonable desiderata for suchrules, there is no rule that can fulfill the proposed desiderata. In PaperVII transformative decision rules are applied to extreme risks, i.e.to a potential outcome of an act for which the probability is low, butwhose (negative) value is high.<br><p>QC 20100622</p>
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Mattos, Alexandre José Negrini de. "Maximização da utilidade esperada, planejamento tributário e governança corporativa." Universidade de São Paulo, 2017. http://www.teses.usp.br/teses/disponiveis/96/96133/tde-10082017-144501/.
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Esta pesquisa examinou se a tomada de decisão dos agentes considera os custos e benefícios do planejamento tributário e se boas práticas de governança corporativa reduzem o engajamento dos gestores na prática de planejamento tributário. Adicionalmente, investigouse a relação entre utilidade esperada/valor esperado do planejamento tributário e o endividamento das empresas. Para mensurar se a prática do planejamento tributário tem relação com a maximização da utilidade esperada do agente (maximização dos benefícios gerados), desenvolveu-se um modelo baseado na proposta de Alligham e Sandmo (1972), segundo a qual, a prática do planejamento tributário está relacionada a uma análise econômica dos custos e benefícios desta ação. As premissas utilizadas foram o período de 13 anos de discussão administrativa e judicial do débito tributário, correção do débito tributário, custo de capital de terceiros e encargos de 100% do valor do tributo (multa, juros e honorários advocatícios). Os resultados foram expandidos para diversos cenários de tempo (períodos de 8, 13 e 18 anos), encargos de 50%, 100% e 150% e variável dependente calculada com base nos valores registrados como passivos contingentes (notas explicativas), contingências fiscais prováveis (reconhecida nas demonstrações contábeis), e soma de ambas. Além disso, as análises foram feitas em nível (nominal escalonada pelo ativo total) e logaritmo. A amostra pesquisa foi composta pelas empresas brasileiras de capital aberto que fizeram parte do índice IBrX100 e abrange o período de 2008 a 2015. As análises empíricas confirmam que na maior parte dos casos a utilidade esperada do agente (valor esperado) é positiva, indicando que a tomada de decisão sobre a prática de planejamento tributário é fruto da maximização da utilidade esperada do agente, o que pode explicar os elevados números registrados de provisões e passivos contingentes nas demonstrações financeiras e notas explicativas das empresas. Além disso, identificou-se que regras rígidas de governança corporativa possuem correlação negativa com a utilidade esperada do agente, podendo ser considerada como um desincentivo à prática de planejamento tributário. Identificou-se ainda, que a variável endividamento apresentou correlação negativa com a utilidade esperada ou o valor esperado do planejamento tributário. A utilização de um modelo para avaliação da utilidade esperada/valor esperado do planejamento tributário pode contribuir para a melhor compreensão desse fenômeno e para a proposição futuras de políticas públicas.<br>This study examined whether the decision-making of the agents considers the costs and benefits of tax avoidance and if good practices of corporate governance reduces the engagement of managers in the practice of tax avoidance. Additionally, it was investigated the relationship between the expected utility/expected value of tax avoidance and the indebtedness of the companies. In order to measure if the practice of tax avoidance is related to the maximization of the expected utility of the agent (maximization of the benefits generated), a model based on the proposal of Alligham and Sandmo (1972) was developed, according to which the practice of tax avoidance is related to an economic analysis of the costs and benefits. The premises used were the period of time of 13 years of administrative and judicial lawsuit, correction of the tax debt, cost of debt and charges of 100% (fine, interest and legal fees) over the tax unpaid. The results were expanded to several time scenarios (periods of 8, 13 and 18 years), charges of 50%, 100% and 150% and dependent variable calculated based on the amounts recorded as contingent liabilities (footnotes), tax provisions (financial statements), and sum of both. Furthermore, the analyses were done at level (nominal staggered by total assets) and logarithm. The research sample was composed of Brazilian publicly traded companies that were part of the IBrX100 index and covers the period between 2008 and 2015. Empirical analysis confirms that in most of the cases, the expected utility of the agent (expected value) is positive, indicating that the decision on the tax avoidance practice is a result of the maximization of the agent\'s expected utility, which may explain the large numbers of provisions and contingent liabilities in the financial statements and the footnotes of the companies. In addition, it was identified that rigid rules of corporate governance practices has a negative correlation with the expected utility of the agent, and can be considered as a disincentive to the practice of tax avoidance. It was also identified that the indebtedness variable presented a negative correlation with the expected utility or the expected value of the tax avoidance. The use of a model to evaluate the expected utility/expected value of tax avoidance can contribute to a better understanding of this phenomenon and to the future proposition of public policies.
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Karlsson, Oskar, and Oskar Sjöbeck. "The use of SRI strategies and motivational factors : A case study among banks and fund companies." Thesis, Linnéuniversitetet, Institutionen för nationalekonomi och statistik (NS), 2020. http://urn.kb.se/resolve?urn=urn:nbn:se:lnu:diva-96879.
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Background: In today's society, there is more pressure to be sustainable and not least in the financial world. Several agreements, such as the Paris Agreement, have been created to steer countries towards more sustainability. When it comes to the economy, several SRI strategies have been developed to serve the same purpose. However, the problem that emerges is that investors who invest sustainably and use these strategies can lose returns and thus depart from their main goal of maximizing profits. Purpose: The purpose of this paper is to examine how SRI strategies are used by investors when constructing their portfolios in terms of profit maximization. The paper will thus conclude if the underlying motivation behind the choice of strategy is affected by maximizing profit. Method and implementation: By conducting a qualitative study and interviewing several fund managers at the largest banks and fund companies in Sweden, the authors aim to answer the research question. The answers provided by the respondents are presented and analyzed in the empirical section and linked to the study's theory. Conclusion: In this study, there is clearly shown that by investing, according to SRI, a professional investor is still able to profit maximize. The authors, therefore, see that the new way of being rational as an investor is to include SRI strategies. The relationship with being both sustainable and profit-maximizing can be seen as a significant motivating factor. The same can be said about reduced ESG risk and creating legitimacy towards customers. Furthermore, a combination of strategies can be seen as a way to create an optimal portfolio by the investors. This further proves that sustainable investing is the most rational way of investing and a way to achieve an investors main goal to profit maximize.
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Tran, Quoc-Tran. "Some contributions to financial market modelling with transaction costs." Thesis, Paris 9, 2014. http://www.theses.fr/2014PA090036/document.
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Cette thèse traite plusieurs problèmes qui se posent pour les marchés financiers avec coûts de transaction et se compose de quatre parties.On commence, dans la première partie, par une étude du problème de couverture approximative d’une option Européenne pour des marchés de volatilité locale avec coûts de transaction proportionnelles.Dans la seconde partie, on considère le problème de l’optimisation de consommation dans le modèle de Kabanov, lorsque les prix sont conduits par un processus de Lévy.Dans la troisième partie, on propose un modèle général incluant le cas de coûts fixes et coûts proportionnels. En introduisant la notion de fonction liquidative, on étudie le problème de sur-réplication d’une option et plusieurs types d’opportunités d’arbitrage.La dernière partie est consacrée à l’étude du problème de maximisation de l’utilité de la richesse terminale d’une portefeuille sous contraintes de risque<br>This thesis deals with different problems related to markets with transaction costs and is composed of four parts.In part I, we begin with the study of assymptotic hedging a European option in a local volatility model with bid-ask spread.In part II, we study the optimal consumption problem in a Kabanov model with jumps and with default risk allowed.In part III, we sugest a general market model defined by a liquidation procès. This model is more general than the models with both fixed and proportional transaction costs. We study the problem of super-hedging an option, and the arbitrage theory in this model.In the last part, we study the utility maximization problem under expected risk constraint
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Coimbra-Lisboa, Paulo César. "On the contamination of confidence." reponame:Repositório Institucional do FGV, 2009. http://hdl.handle.net/10438/7728.
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Previous issue date: 2009-11-30<br>Contaminação da confiança é um caso especial de incerteza Knightiana ou ambiguidade na qual o tomador de decisões está diante de não apenas uma única distribuição de probabilidades, mas sim de um conjunto de distribuições de probabilidades. A primeira parte desta tese tem o propósito de fornecer uma caracterização da contaminação da confiança e então apresentar um conjunto de axiomas comportamentais simples sob os quais as preferências de um tomador de decisões é representada pela utilidade esperada de Choquet com contaminação da confiança. A segunda parte desta tese apresenta duas aplicações econômicas de contaminação da confiança: a primeira delas generaliza o teorema de existência de equilíbrio de Nash de Dow e Werlang (o que permite apresentar uma solução explícita para o paradoxo segundo o qual os jogadores de um jogo do dilema dos prisioneiros com um número infinito de repetições não agem de acordo com o esperado pelo procedimento da indução retroativa) e a outra estuda o impacto da contaminação da confiança na escolha de portfolio.<br>Contamination of confidence is a special case of Knightian uncertainty or ambiguity in which the decision maker faces not simple probability measure but a set of probability measures. The first part of this thesis has the purpose to provide a characterization of the contamination of confidence and then present a simple set of behavioral axioms under which the decision maker’s preference is represented by the Choquet expected utility with contamination of confidence. The second part of this thesis presents two economic applications of the contamination of confidence: the first of them generalizes Dow and Werlang’s existence Theorem of Nash equilibrium under uncertainty (which enables to present an explicit solution to the paradox on which players in a finitely repeated prisoners’ dilemma breaks down backward induction) and the other studies the impact of the contamination of confidence in the portfolio choice.
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Soumana, Hima Abdoulaye. "Équations différentielles stochastiques sous G-espérance et applications." Thesis, Rennes 1, 2017. http://www.theses.fr/2017REN1S007/document.
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Depuis la publication de l'ouvrage de Choquet (1955), la théorie d'espérance non linéaire a attiré avec grand intérêt des chercheurs pour ses applications potentielles dans les problèmes d'incertitude, les mesures de risque et le super-hedging en finance. Shige Peng a construit une sorte d'espérance entièrement non linéaire dynamiquement cohérente par l'approche des EDP. Un cas important d'espérance non linéaire cohérente en temps est la G-espérance, dans laquelle le processus canonique correspondant (B_{t})_{t≥0} est appelé G-mouvement brownien et joue un rôle analogue au processus de Wiener classique. L'objectif de cette thèse est d'étudier, dans le cadre de la G-espérance, certaines équations différentielles stochastiques rétrogrades (G-EDSR) à croissance quadratique avec applications aux problèmes de maximisation d'utilité robuste avec incertitude sur les modèles, certaines équations différentielles stochastiques (G-EDS) réfléchies et équations différentielles stochastiques rétrogrades réfléchies avec générateurs lipschitziens. On considère d'abord des G-EDSRs à croissance quadratique. Dans le Chapitre 2 nous fournissons un resultat d'existence et unicité pour des G-EDSRs à croissance quadratique. D'une part, nous établissons des estimations a priori en appliquant le théorème de type Girsanov, d'où l'on en déduit l'unicité. D'autre part, pour prouver l'existence de solutions, nous avons d'abord construit des solutions pour des G-EDSRs discretes en résolvant des EDPs non-linéaires correspondantes, puis des solutions pour les G-EDSRs quadratiques générales dans les espaces de Banach. Dans le Chapitre 3 nous appliquons les G-EDSRs quadratiques aux problèmes de maximisation d'utilité robuste. Nous donnons une caratérisation de la fonction valeur et une stratégie optimale pour les fonctions d'utilité exponentielle, puissance et logarithmique. Dans le Chapitre 4, nous traitons des G-EDSs réfléchies multidimensionnelles. Nous examinons d'abord la méthode de pénalisation pour résoudre des problèmes de Skorokhod déterministes dans des domaines non convexes et établissons des estimations pour des fonctions α-Hölder continues. A l'aide de ces résultats obtenus pour des problèmes déterministes, nous définissons le G-mouvement Brownien réfléchi et prouvons son existence et son unicité dans un espace de Banach. Ensuite, nous prouvons l'existence et l'unicité de solution pour les G-EDSRs multidimensionnelles réfléchies via un argument de point fixe. Dans le Chapitre 5, nous étudions l'existence et l'unicité pour les équations différentielles stochastiques rétrogrades réfléchies dirigées par un G-mouvement brownien lorsque la barrière S est un processus de G-Itô<br>Since the publication of Choquet's (1955) book, the theory of nonlinear expectation has attracted great interest from researchers for its potential applications in uncertainty problems, risk measures and super-hedging in finance. Shige Peng has constructed a kind of fully nonlinear expectation dynamically coherent by the PDE approach. An important case of time-consistent nonlinear expectation is G-expectation, in which the corresponding canonical process (B_{t})_{t≥0} is called G-Brownian motion and plays a similar role to the classical Wiener process. The objective of this thesis is to study, in the framework of the G-expectation, some backward stochastic differential equations (G-BSDE) under a quadratic growth condition on their coefficients with applications to robust utility maximization problems with uncertainty on models, Reflected stochastic differential equations (reflected G-SDE) and reflected backward stochastic differential equations with Lipschitz coefficients (reflected G-BSDE). We first consider G-BSDE with quadratic growth. In Chapter 2 we provide a result of existence and uniqueness for quadratic G-BSDEs. On the one hand, we establish a priori estimates by applying the Girsanov-type theorem, from which we deduce the uniqueness. On the other hand, to prove the existence of solutions, we first constructed solutions for discrete G-BSDEs by solving corresponding nonlinear PDEs, then solutions for the general quadratic G-BSDEs in the spaces of Banach. In Chapter 3 we apply quadratic G-BSDE to robust utility maximization problems. We give a characterization of the value function and an optimal strategy for exponential, power and logarithmic utility functions. In Chapter 4, we discuss multidimensional reflected G-SDE. We first examine the penalization method to solve deterministic Skorokhod problems in non-convex domains and establish estimates for continuous α-Hölder functions. Using these results for deterministic problems, we define the reflected G-Brownian motion and prove its existence and its uniqueness in a Banach space. Then we prove the existence and uniqueness of the solution for the multidimensional reflected G-SDE via a fixed point argument. In Chapter 5, we study the existence and uniqueness of the reflected backward stochastic differential equations driven by a G-Brownian motion when the obstacle S is a G-Itô process
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Etieyibo, Edwin. "David Gauthiers Moral Contractarianism and the Problem of Secession." Phd thesis, 2009. http://hdl.handle.net/10048/598.
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This thesis proposes a reading of David Gauthiers moral contractarianism (hereinafter Mb(CM)A) that demonstrates how cooperation can be rational in situations where expected utilities (EU) are stacked too high against cooperation. The dissertation critically examines Mb(CM)A and contends that it breaks down in the test of application, i.e. the problem of secession because of the conception of rationality it appeals to. Mb(CM)A identifies rationality with utility-maximization, where utility is the measure of considered coherent preferences about outcomes. Mb(CM)A links morality to reason, and reason to practical rationality, and practical rationality to interest, which it identifies with individual utility. On this view, an action (or a disposition) is rational if that action (or disposition) maximizes an agents EU. This conception of rationality the essay claims is both nave and misleading because it does not take into account an agents considered preference for the acts that are available, in addition to the EU of those acts. Therefore, the thesis argues that Mb(CM)As account of rationality be abandoned in favor of a decision-value/symbolic utilitys or morals by decision-value agreements conception of practical rationality. Morals by decision-value agreement (henceforth Mb(DV)A), the dissertation claims, handles serious problems, like the problem of secession in ways that Mb(CM)A cannot. Mb(CM)A breaks down in the test of application because when applied to the problem of secession, it suggests a single-tracked silver bullet solution. Specifically, it tracks only EU-reasons and claims that insofar as cooperation does not maximize the EU of better-off agents, it is not rational for them to cooperate with or support those that are less well-off. By contrast, Mb(DV)A offers a multi-tracked framework for solutions to the problem, namely: it factors in an agents considered preference for the acts that are available, in addition to EU of those acts. It is the argument of the thesis that when EU is stacked too high against cooperation, it may or may not be rational for an agent to cooperate, depending on which way symbolic utility (SU) for that agent points toward. If SU points in the direction of secession, then it is DV-rational for an agent not to cooperate, but if SU points toward non-secession, then it is DV-rational for that agent to cooperate.
Books on the topic "Expected utility maximization problem"
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Weirich, Paul. Rational Responses to Risks. Oxford University Press, 2020. http://dx.doi.org/10.1093/oso/9780190089412.001.0001.
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A philosophical account of risk, such as this book provides, states what risk is, which attitudes to it are rational, and which acts affecting risks are rational. Attention to the nature of risk reveals two types of risk, first, a chance of a bad event, and, second, an act’s risk in the sense of the volatility of its possible outcomes. The distinction is normatively significant because different general principles of rationality govern attitudes to these two types of risk. Rationality strictly regulates attitudes to the chance of a bad event and is more permissive about attitudes to an act’s risk. Principles of rationality governing attitudes to risk also justify evaluating an act according to its expected utility given that the act’s risk, if any, belongs to every possible outcome of the act. For a rational ideal agent, the expected utilities of the acts available in a decision problem explain the agent’s preferences among the acts. Maximizing expected utility is just following preferences among the acts. This view takes an act’s expected utility, not just as a feature of a representation of preferences among acts, but also as a factor in the explanation of preferences among acts. It takes account of an agent’s attitudes to an act’s risk without weakening the standard of expected-utility maximization. The view extends to evaluations of combination of acts, either simultaneous or in a sequence. Applications cover hedging, return-risk evaluation, professional advice, and government regulation.
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Risky Curves: On the Empirical Failure of Expected Utility. Taylor & Francis Group, 2014.
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Daniel, Friedman. Risky Curves: On the Empirical Failure of Expected Utility. Taylor & Francis Group, 2017.
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Caie, Michael. A Problem for Credal Consequentialism. Oxford University Press, 2018. http://dx.doi.org/10.1093/oso/9780198779681.003.0009.
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Caie focuses on an epistemic utility theory picture of epistemic norms where epistemic utility functions measure the value of degrees of belief, and rationality consists in maximizing expected epistemic utility. Caie argues that in a wide variety of cases this view says that all degreed beliefs are rational, or none are, or it issues no verdicts. This is, roughly, because an agent’s degrees of beliefs will often not encode the appropriate dependence hypotheses that are needed so that various beliefs have expected epistemic utility values. Caie thus argues the unintuitive verdicts of epistemic utility theory are not limited to the byzantine examples of epistemic trade-offs, but are much more widespread.
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Okasha, Samir. Risk, Rational Choice, and Evolution. Oxford University Press, 2018. http://dx.doi.org/10.1093/oso/9780198815082.003.0009.
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Decision-theoretic ideas arise in two areas of biology: risk-sensitive foraging, and the theory of evolution in variable environments. The former concerns the actual behavioural choices that organisms make, the latter the ‘choices’ made by natural selection. A natural suggestion is that both sorts of choices can be modelled in terms of expected utility maximization, the standard theory of rational decision in the face of risk. However, this is only true under particular model assumptions; it does not hold in situations involving a combination of aggregate and idiosyncratic risk. Mixed strategies further complicate the relation between rational and biologically optimal risk preferences. This implies a limit on the validity of the organism-as-rational-agent heuristic as a tool for understanding evolved behaviour.
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Pettigrew, Richard. Choosing for Changing Selves. Oxford University Press, 2019. http://dx.doi.org/10.1093/oso/9780198814962.001.0001.
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What we value, like, endorse, want, and prefer changes over the course of our lives. Sometimes this is a result of decisions we make—such as when we choose to become a parent or move to a new country—and sometimes it is caused by forces beyond our control—such as when our political views change as we grow older. This poses a problem for any theory of how we ought to make decisions. Which values and preferences should we appeal to when we are making our decisions? Our current values? Our past ones? Our future ones? Or some amalgamation of all of them? But if that, which amalgamation? This book presents a theory of rational decision-making for people whose values have changed in the past and might change again in the future. It begins with expected utility theory, the orthodox theory of rational choice, and raises the problem of choosing for changing selves in that context. It then offers a new decision theory that avoids the problem. In the process, the book considers a host of related problems: Is it rational to give less weight to your far future preferences than to those in your near future? Can we have moral obligations to pursue the goals of our past selves? Do we know enough about our future preferences to make rational decisions that are sufficiently sensitive to them? How should we combine competing sets of values into a single set?
Book chapters on the topic "Expected utility maximization problem"
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Lam, Ka-man, and Ho-fung Leung. "Expected Utility Maximization and Attractiveness Maximization." In Agent Computing and Multi-Agent Systems. Springer Berlin Heidelberg, 2006. http://dx.doi.org/10.1007/11802372_72.
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Brehmer, Johannes. "General Problem Setup." In Utility Maximization in Nonconvex Wireless Systems. Springer Berlin Heidelberg, 2012. http://dx.doi.org/10.1007/978-3-642-17438-4_2.
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Dahlbäck, Olof. "Descriptive Validity of the Rationality Theories of Expected Utility Maximization." In Analyzing Rational Crime — Models and Methods. Springer Netherlands, 2003. http://dx.doi.org/10.1007/978-94-017-0721-3_4.
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Zhang, Chao, Hang Zou, Samson Lasaulce, Vineeth S. Varma, Lucas Saludjian, and Patrick Panciatici. "Optimal Pricing Approach Based on Expected Utility Maximization with Partial Information." In Network Games, Control and Optimization. Springer International Publishing, 2021. http://dx.doi.org/10.1007/978-3-030-87473-5_25.
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Bordigoni, Giuliana, Anis Matoussi, and Martin Schweizer. "A Stochastic Control Approach to a Robust Utility Maximization Problem." In Stochastic Analysis and Applications. Springer Berlin Heidelberg, 2007. http://dx.doi.org/10.1007/978-3-540-70847-6_6.
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Résonyi, Miklós, and Lukasz Stettner. "On the Existence of Optimal Portfolios for the Utility Maximization Problem in Discrete Time Financial Market Models." In From Stochastic Calculus to Mathematical Finance. Springer Berlin Heidelberg, 2006. http://dx.doi.org/10.1007/978-3-540-30788-4_29.
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Watakajaturaphon, Sirapat, and Parkpoom Phetpradap. "PM 2.5 Problem in Chiang Mai, Thailand: The Application of Maximizing Expected Utility with Imbalanced Loss Functions." In Lecture Notes in Computer Science. Springer International Publishing, 2020. http://dx.doi.org/10.1007/978-3-030-62509-2_7.
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Comesaña, Juan. "Probability and Decision Theory." In Being Rational and Being Right. Oxford University Press, 2020. http://dx.doi.org/10.1093/oso/9780198847717.003.0002.
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This chapter introduces the mathematics of probability and decision theory. The probability calculus is introduced in both a set-theoretic and a propositional context. Probability is also related to measure theory, and stochastic truth-tables are presented. Problems with conditional probability are examined. Two interpretations of the probability calculus are introduced: physical and normative probabilities. The problem of logical omniscience for normative probabilities is discussed. Dutch Book arguments and accuracy-based arguments for Probabilism (the claim that our credences must satisfy the probability axioms) are examined and rejected. Different interpretations of the “idealization” reply to the problem of logical omniscience are considered, and one of them is tentatively endorsed. The expected utility maximization conception of decision theory is introduced, and representation arguments are considered (and rejected) as another reply to the problem of logical omniscience.
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"Instrumental Rationality as Expected Utility Maximization." In The Foundations of Causal Decision Theory. Cambridge University Press, 1999. http://dx.doi.org/10.1017/cbo9780511498497.003.
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Weirich, Paul. "Conclusion." In Rational Responses to Risks. Oxford University Press, 2020. http://dx.doi.org/10.1093/oso/9780190089412.003.0012.
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Recognizing that an act’s risk is a consequence of the act yields a version of expected-utility maximization that does not need adjustments for risk in addition to the probabilities and utilities of possible outcomes. This treatment of an act’s risk justifies the expected-utility principle, and the mean-risk principle, for evaluation of an act. Rational attitudes to risks explain the rationality of acting in accord with the principles. They ground the separability relations that support the principles. The expected-utility principle justifies a substantive, and not just a representational, version of the decision principle of expected-utility maximization. Consequently, the principle governs a single choice and not just sets of choices. It demands more than consistency of the choices in a set. It demands that each choice follow the agent’s preferences, and these preferences explain the rationality of a choice that complies with the principle.
Conference papers on the topic "Expected utility maximization problem"
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Safarkhani, Salar, Ilias Bilionis, and Jitesh H. Panchal. "Understanding the Effect of Task Complexity and Problem-Solving Skills on the Design Performance of Agents in Systems Engineering." In ASME 2018 International Design Engineering Technical Conferences and Computers and Information in Engineering Conference. American Society of Mechanical Engineers, 2018. http://dx.doi.org/10.1115/detc2018-85941.
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Systems engineering processes coordinate the efforts of many individuals to design a complex system. However, the goals of the involved individuals do not necessarily align with the system-level goals. Everyone, including managers, systems engineers, subsystem engineers, component designers, and contractors, is self-interested. It is not currently understood how this discrepancy between organizational and personal goals affects the outcome of complex systems engineering processes. To answer this question, we need a systems engineering theory that accounts for human behavior. Such a theory can be ideally expressed as a dynamic hierarchical network game of incomplete information. The nodes of this network represent individual agents and the edges the transfer of information and incentives. All agents decide independently on how much effort they should devote to a delegated task by maximizing their expected utility; the expectation is over their beliefs about the actions of all other individuals and the moves of nature. An essential component of such a model is the quality function, defined as the map between an agent’s effort and the quality of their job outcome. In the economics literature, the quality function is assumed to be a linear function of effort with additive Gaussian noise. This simplistic assumption ignores two critical factors relevant to systems engineering: (1) the complexity of the design task, and (2) the problem-solving skills of the agent. Systems engineers establish their beliefs about these two factors through years of job experience. In this paper, we encode these beliefs in clear mathematical statements about the form of the quality function. Our approach proceeds in two steps: (1) we construct a generative stochastic model of the delegated task, and (2) we develop a reduced order representation suitable for use in a more extensive game-theoretic model of a systems engineering process. Focusing on the early design stages of a systems engineering process, we model the design task as a function maximization problem and, thus, we associate the systems engineer’s beliefs about the complexity of the task with their beliefs about the complexity of the function being maximized. Furthermore, we associate an agent’s problem solving-skills with the strategy they use to solve the underlying function maximization problem. We identify two agent types: “naïve” (follows a random search strategy) and “skillful” (follows a Bayesian global optimization strategy). Through an extensive simulation study, we show that the assumption of the linear quality function is only valid for small effort levels. In general, the quality function is an increasing, concave function with derivative and curvature that depend on the problem complexity and agent’s skills.
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Bade, Korinna, Eyke Hullermeier, and Andreas Nurnberger. "Hierarchical Classification by Expected Utility Maximization." In Sixth International Conference on Data Mining (ICDM'06). IEEE, 2006. http://dx.doi.org/10.1109/icdm.2006.80.
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Bayaraa, Ser-Od, U. Delgersaikhan, and N. Dalaisaikhan. "Utility maximization problem using curve trapezoidal fuzzy number." In 2013 8th International Forum on Strategic Technology (IFOST). IEEE, 2013. http://dx.doi.org/10.1109/ifost.2013.6616992.
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Brehmer, Johannes, and Wolfgang Utschick. "A Decomposition of the Downlink Utility Maximization Problem." In 2007 41st Annual Conference on Information Sciences and Systems. IEEE, 2007. http://dx.doi.org/10.1109/ciss.2007.4298344.
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Bedi, Amrit S., Ketan Rajawat, and Marceau Coupechoux. "An Online Approach to D2D Trajectory Utility Maximization Problem." In IEEE INFOCOM 2018 - IEEE Conference on Computer Communications. IEEE, 2018. http://dx.doi.org/10.1109/infocom.2018.8485855.
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Vo, Phuong L., Anh T. Le, and Choong S. Hong. "The successive approximation approach for multi-path utility maximization problem." In ICC 2012 - 2012 IEEE International Conference on Communications. IEEE, 2012. http://dx.doi.org/10.1109/icc.2012.6363668.
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Abba, G., A. K. Nagar, H. Tawfik, and J. Y. Goulermas. "Welfare Maximization in Nonconvex Rate Utility Problem of Multimedia e-Communication Systems." In 2009 Second International Conference on Developments in eSystems Engineering (DESE). IEEE, 2009. http://dx.doi.org/10.1109/dese.2009.14.
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Marston, Matthew, and Farrokh Mistree. "An Implementation of Expected Utility Theory in Decision Based Design." In ASME 1998 Design Engineering Technical Conferences. American Society of Mechanical Engineers, 1998. http://dx.doi.org/10.1115/detc98/dtm-5670.
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Abstract The development of a design science rests on the ideal that design is anchored in a set of fundamental axioms similar to the more ‘traditional’ sciences of mathematics and physics. However, the axioms upon which a design science is constructed must reflect that design is a science of the artificial. It is our contention that such axioms may exist in Decision-Based Design as those formulated by von-Neumann and Morgenstern for developing utilities under conditions of risk. In this paper we have a very narrow focus: evaluating a proposed framework for applying these axioms in the context of a simple design problem through the use of Monte Carlo simulation and expected utility theory.
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Gilbert, Hugo, Nawal Benabbou, Patrice Perny, Olivier Spanjaard, and Paolo Viappiani. "Incremental Decision Making Under Risk with the Weighted Expected Utility Model." In Twenty-Sixth International Joint Conference on Artificial Intelligence. International Joint Conferences on Artificial Intelligence Organization, 2017. http://dx.doi.org/10.24963/ijcai.2017/640.
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This paper deals with decision making under risk with the Weighted Expected Utility (WEU) model, which is a model generalizing expected utility and providing stronger descriptive possibilities. We address the problem of identifying, within a given set of lotteries, a (near-)optimal solution for a given decision maker consistent with the WEU theory. The WEU model is parameterized by two real-valued functions. We propose here a new incremental elicitation procedure to progressively reduce the imprecision about these functions until a robust decision can be made. We also give experimental results showing the practical efficiency of our method.
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Thurston, Deborah L., James V. Carnahan, and Tiefu Liu. "Optimization of Design Utility." In ASME 1991 Design Technical Conferences. American Society of Mechanical Engineers, 1991. http://dx.doi.org/10.1115/detc1991-0045.
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Abstract Design optimization is often carried out with respect to a single objective, for example, weight or manufacturing cost. Weight, cost, quality and robustness are each important considerations in design evaluation. However, when the design process is completed, a design is evaluated with respect to its performance in all of these areas, and possibly others, in addition to mechanical design considerations. The process of design should be driven from the very beginning by consideration of how the design artifact will ultimately be evaluated. We present a method for design analysis whose basic premise is that design analysis should be based on a rigorously determined multiple attribute design evaluation function. The evaluation function provides insight necessary to formulate a non-linear programming problem. A clear distinction is made between design attributes and design constraints. The objective function is maximization of utility. Explicit representations of relationships between decisions which designers make and resulting design performance in each of several attributes serve as constraints. An illustrative example of automotive bumper beam design optimization is presented. By coupling the physical relationships between the design decision variable beam gauge and the attributes weight, deflection and cost, maximization of the worth of the design in terms of the best combination of these attributes is possible. The solution can be expressed in terms of elements of a design vector over which the designer has direct control.