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X% per turn over Y turns? Is my working out correct? risks and probabilities.

4% per turn * (over the course of) 25 turns. e.g. 1 Person $\alpha$ let's call him bob. Bob a 4% chance of winning something every day for 25 days. Whats the chance of him winning? (about 100%?) ...
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20 views

Is it a Risk-averse utility function?

I'm a little unsure whether this utility function represents a risk-averse attitude, while it's not wholly concave: Would you define it as both risk-averse and risk-neutral as it seems to have ...
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28 views

Decisions with Probabilities - application

A company has to decide whether to manufacture a product at its plant or purchase from a supplier. The resulting profit depends on the demand for the product. The estimated profit is shown below: ...
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1answer
127 views

Tangent portfolio weights without short sales?

Consider a mean-variance investor in a world with a risk-free asset. Let $R_f>0$ be the return of the risk-free asset, $\mathbb{E}(R_i)>R_f$ the expected return of the risky asset $i$ and ...
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1answer
30 views

Portfolio Theory - Finance Riskless Assets Return

A market consists of two risky assets and one riskless asset. Asset 1 has a return of 8% and a risk of 10%. Asset 2 has a return of 16% and a risk of 30% The correlation between the returns of the two ...
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10 views

Comparing cost of two alternative given their distribution

I have distribution for cost of two alternative through Monte Carlo simulation. The distributions are not normal. Given the benefit of the two alternatives is the same but ungiven, I want to choose ...
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1answer
112 views

Heavy-tailed distributions

I have encountered the following two definitions of heavy-tailedness (right tail) for a $[0,\infty)$-valued random variable $X$ satisfying $\mathbb{E}[X]<\infty$: (i) ...
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1answer
55 views

Algorithm for risky investments in banks

I made the following programming question on stack overflow but the users said it was more of math question. Here it is. Situation You start with a fixed amount of money, take it as $\$1000$. You ...
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1answer
105 views

Calculate single “battle” outcome odds for RISK

I am trying to reproduce the values in this odds ratio table from Wikipedia. For all those unfamiliar with RISK, this is a game where units fight against each other via the roll of the dice: The ...
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1answer
57 views

How to find the expectation value?

Suppose that an insurer has an exponential utility function $u(x)=−2e^{-2x}$. What is the minimum premium $P^{-}$ to be asked for a risk X? After solving this we reached the following, So,only ...
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1answer
95 views

Why is that a risk averse consumer buys the optimum insurance when there is actuarially fair insurance?

I've asked the same question at the Quantitative Finance StackExchange. Consider the following example: "As a risk-averse consumer, you would want to choose a value of x so as to maximize expected ...
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1answer
131 views

Markov chains example

Your exam could be marked with a range of possible grades, simplified as on the following state diagram: To begin with the chances are that you will pass with a standard result. Each 45 minutes ...
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1answer
61 views

What is the minimum Premium to be asked for a risk X?

Suppose that an insurer has an exponential utility function $u(x) =-2e^{-2x}.$ What is the minimum premium $P^{-}$ to be asked for a risk X? I got some hint for this, but I could not understand ...
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1answer
86 views

Question about the risk analysis.

In the above one can see the detail of this question, I am beginner in this kind of mathematics. I will be very greatful if any one can help me to solve them.
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1answer
382 views

Modelling risk when market making

I'm interested in learning about algorithmic trading, particularly in bitcoin. Looking at this chart, I can see that I could simultaneously offer a bid that was slightly higher than the highest ...
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0answers
51 views

Calculate risk that occurs p% of a time

In a search of a way to calculate variance for risk management I found the following formula (n1, n2, n3 are data points): ...
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1answer
76 views

Risk and probability: Is there always infinite risk?

If there are an infinite number of events with a cost (risks), and total Risk is calculated by the sum of all individual risks multiplied by their probability, does everything have an infinite risk ...
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1answer
98 views

Expected value of OR gate

Suppose a system such as A+B where + means OR. Suppose A and B are identical. Each event obeys exponential distribution with mean $\lambda$. What is the mean $\lambda_{\text{System}}$ for the whole ...
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0answers
26 views

Dominance relation with different confidence intervals: why not always acting like a strict poset?

I have noticed that a dominance relation acts like a strict poset with the confidence interval equal to 0 but very differently with non-zero confidence intervals. For example, 1D2 and 2D3 always ...
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1answer
458 views

PRA: Rare event approximation with $P(A\cup B \cup \neg C)$?

The rare event approximation for event $A$ and $B$ means the upper-bound approximation $P(A\cup B)=P(A)+P(B)-P(A\cap B)\leq P(A)+P(B)$. Now by inclusion-exclusion-principle $$P(A\cup B\cup \neg C)= ...