Search results for "Choice problem"
showing 4 items of 4 documents
Optimal Dynamic Portfolio Risk Management
2016
Numerous econometric studies report that financial asset volatilities and correlations are time-varying and predictable. Over the past decade, this knowledge has stimulated increasing interest in various dynamic portfolio risk control techniques. The two basic types of risk control techniques are: risk control across assets and risk control over time. At present, the two types of risk control techniques are not implemented simultaneously. There has been surprisingly little theoretical study of optimal dynamic portfolio risk management. In this paper, the author fills this gap in the literature by formulating and solving the multi-period portfolio choice problem. In terms of dynamic portfoli…
The best choice problem with an unknown number of objects
1993
The secretary problem with a known prior distribution of the number of candidates is considered. Ifp(i)=p(N=i),i ∈ [α, β] ∩ ℕ, whereα=inf{i ∈ℕ:p(i) > 0} andβ=sup{i ∈ℕ:p(i)≳0}, is the prior distribution of the numberN of candidates it will be shown that, if the optimal stopping rule is of the simple form, then the optimal stopping indexj=minΓ satisfies asymptotically (asβ → ∞) the equationj=exp $${{\left[ {\left( {\sum\limits_{i = max(\alpha ,j)}^\beta {p(i) \log (i)/i} } \right)} \right]} \mathord{\left/ {\vphantom {{\left[ {\left( {\sum\limits_{i = max(\alpha ,j)}^\beta {p(i) \log (i)/i} } \right)} \right]} {\left. {\left( {\sum\limits_{i = max(\alpha ,j)}^\beta {p(i)/i} } \right) - 1} \ri…
HUMAN BEHAVIOR IN A MULTI-CRITERIA CHOICE PROBLEM WITH INDIVIDUAL TASKS OF DIFFERENT DIFFICULTIES
2003
This paper is devoted to a laboratory study of human behavior in a multi-criteria choice problem. The specific feature of the experimental study is the creation of an individually adjusted instance of a general task for each subject in accordance with his/her preferences over each criterion. Human behavior is studied in a specially constructed choice situation based on the decomposition of the alternatives of a multi-criteria problem. The procedure is based on multiple steps of pair-wise comparisons involving only some (two or three) of the original components of the alternatives. Abilities of subjects to use such comparisons and to answer the questions in a logical way are tested. The exp…
Warren Buffett versus Zvi Bodie: Should You Buy Or Sell Put Options?
2021
Academics and investment professionals often disagree when it comes to investment advice. Legendary investor Warren Buffett is a proponent of time diversification and firmly believes that stocks are less risky in the long run. Therefore, he often sells long-term put options instead of buying them for portfolio protection. By contrast, the famous finance professor Zvi Bodie argues that time diversification is a fallacy and, therefore, his advice to fund managers is to buy long-term portfolio insurance. In this article, we consider the optimal portfolio choice problem for a loss-averse investor. First, we demonstrate that our loss-averse investor subscribes to the principle of time diversific…