Handbook Of The Fundamentals Of Financial Decision Making (In 2 Parts)

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 2nd edition published in 2006).Contents: Part I: Decision Making Under Uncertainty: Section A. Arbitrage and Asset Pricing: The Arbitrage Theory of Capital Asset Pricing (SA Ross) The Fundamental Theorem of Asset Pricing (W Schachermayer) Risk Neutral Pricing (W Schachermayer) Using Tucker's Theorem of the Alternative to Provide a Framework for Proving Basic Arbitrage Results (M Kallio and WT Ziemba) Section B. Utility Theory: A General Theory of Subjective Probabilities and Expected Utilities (P Fishburn) Prospect Theory: An Analysis of Decisions Under Risk (D Kahneman and A Tversky) Prospect Theory: Much Ado About Nothing? (M Levy and H Levy) The Data of Levy and Levy (2002) “Prospect Theory: Much Ado About Nothing?” Actually Support Prospect Theory (PP Wakker) Prospect Theory and Mean-Variance Analysis (M Levy and H Levy) Violations of Cumulative Prospect Theory in Mixed Gambles with Moderate Probabilities (G Baltussen, T Post and PV Vliet) Temporal von Neumann–Morgenstern and Induced Preferences (DM Kreps and EL Porteus) Substitution, Risk Aversion and the Temporal Behavior of Consumption and Asset Returns: A Theoretical Framework (LG Epstein and SE Zin) Risk Aversion and Expected Utility Theory: A Calibration Theorem (M Rabin) Non-Expected Utility Theory (M Machina) Judgment Under Uncertainty: Heuristics and Biases (A Tversky and D Kahneman) Choices, Values, and Frames (D Kahneman and A Tverskya) Section C. Stochastic Dominance: The Efficiency Analysis of Choices Involving Risk (G Hanoch and H Levy) Stochastic Dominance, Efficiency Criteria, and Efficient Portfolios: The Multi-Period Case (H Levy) Section D. Risk Aversion and Static Portfolio Theory: Risk Aversion in the Small and in the Large (JW Pratt) Univariate and Multivariate Measures of Risk Aversion and Risk Premiums (Y Li and WT Ziemba) The Effect of Errors in Means, Variances, and Co-Variances on Optimal Portfolio Choice (VK Chopra and WT Ziemba) Calculation of Investment Portfolios with Risk Free Borrowing and Lending (WT Ziemba, C Parkan and R Brooks-Hill) Comparison of Alternative Utility Functions in Portfolio Selection Problems (JG Kallberg and WT Ziemba) Characterizations of Optimal Portfolios by Univariate and Multivariate Risk Aversion (Y Li and WT Ziemba) Choosing Investment Portfolios When the Returns Have Stable Distributions (WT Ziemba) Covariance Complexity and Rates of Return on Assets (LC MacLean, ME Foster and WT Ziemba) Anomalies: Risk Aversion (M Rabin and RH Thaler) Part II: From Decision Making to Measurement and Dynamic Modeling: Section E. Risk Measures: The Innovest Austrian Pension Fund Planning Model InnoALM (A Geyer and…

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Author : Leonard C MacLean & William T. Ziemba
Genre : Finance
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