World Library  


Add to Book Shelf
Flag as Inappropriate
Email this Book

Utility, Rationality and Beyond – from Behavioral Finance to Informational Finance

By Sukanto Bhattacharya


Description
This work covers a substantial mosaic of related concepts in utility theory as applied to financial decision-making. It reviews some of the classical notions of Benthamite utility and the normative utility paradigm offered by the von Neumann-Morgenstern expected utility theory; exploring its major pitfalls before moving into what is postulated as an entropic notion of utility. Extrinsic utility is proposed as a cardinally measurable quantity; measurable in terms of the expected information content of a set of alternative choices. The entropic notion of utility is subsequently used to model the financial behavior of individual investors based on their governing risk-return preferences involving financial structured products manufactured out of complex, multi-asset options. Evolutionary superiority of the Black-Scholes function in dynamic hedging scenarios is computationally demonstrated using a haploid genetic algorithm model programmed in Borland C. The work explores, both theoretically and computationally, the psycho-cognitive factors governing the financial behavior of individual investors both in the presence as well as absence of downside risk and postulates the concepts of resolvable and irresolvable risk. A formal theorem of consistent preference is proposed and proved. The work also analyzes the utility of an endogenous capital guarantee built within a financial structured product. The aspect of investor empowerment is discussed in terms of how financial behavior of an investor may be transformed if he or she is allowed a choice of one or more assets that may gain entry into the financial structured product. Finally there is a concluding section wherein the different facets are placed in their proper perspective and a number of interesting future research directions are also proposed.

 

Click To View

Additional Books


  • Zrzodla Do Dziejow Polskich : Volume 2 (by )
  • Encyklopedja Powszechna (by )
  • The Power of Our Words (by )
  • Alice in Wonderland (by )
  • Little Big Bye (by )
  • Anna Karenina, Vol. 5 (by )
  • French Natural Remedies & Recipes from B... (by )
  • And Gulliver Returns Book VII : Book 7 V... (by )
  • A Visit from Santa Claus 
  • And Gulliver Returns Book II : Are We Di... (by )
  • Anna Karenina, Vol. 1 (by )
  • Zapysky Istorychnoi Sektsii (by )
Scroll Left
Scroll Right

 



Copyright © World Library Foundation. All rights reserved. eBooks from World Library are sponsored by the World Library Foundation,
a 501c(4) Member's Support Non-Profit Organization, and is NOT affiliated with any governmental agency or department.