A measure of risk and a decision-making model based on expected utility and entropy

Yang, Jiping; Wan-hua, Qiu

doi:10.1016/j.ejor.2004.01.031

Cited by 108 publications

(95 citation statements)

References 31 publications

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“…The work presented here has some similarity with a decision aiding procedure based on expected utility and Shannon entropy [33], though here we use weighted entropy. The objectives of this paper include proving and discussing the mathematical properties of the optimal solution and providing a critical analysis of an expected utility and weighted entropy framework (EU-WE) as a conceptual device generating relative compositional sce-narios of mosaics based on optimality criteria.…”

Section: Weighted Entropy and Utilitymentioning

confidence: 99%

Discussing an Expected Utility and Weighted Entropy Framework

Casquilho¹

2014

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In this paper, it is discussed a framework combining traditional expected utility and weighted entropy (EU-WE)-also named mean contributive value index-which may be conceived as a decision aiding procedure, or a heuristic device generating compositional scenarios, based on information theory concepts, namely weighted entropy. New proofs concerning the maximum value of the index and the evaluation of optimal proportions are outlined, with emphasis on the optimal value of the Lagrange multiplier and its meaning. The rationale is a procedure of maximizing the combined value of a system expressed as a mosaic, denoted by characteristic values of the states and their proportions. Other perspectives of application of this EU-WE framework are suggested.

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Section: Weighted Entropy and Utilitymentioning

confidence: 99%

Discussing an Expected Utility and Weighted Entropy Framework

Casquilho¹

2014

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“…Risk is a major factor that shapes investors' investment decision including financial and investment decisions (Yang and Qiu, 2005) because it is the risk that determines the probable return he can get.…”

Section: Walia and Kiran 7297mentioning

confidence: 99%

Perceptual gap and anatomy of investment risk decisions

Walia¹,

Kiran²

2011

Afr. J. Bus. Manage.

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Mutual funds put forward a way out to investors to approach maximum number of financial securities and get a well-diversified portfolio. Investors are lured by mutual fund investment because along with small savings they neither have sufficient expertise nor the means for diversification. The value added services offered by mutual funds during last decade has definitely lured the untapped investors. Although, investors have shown their presence in mutual funds market by investing in various innovative funds than traditional risk-free securities, it still has not become the most preferred choice of investors. Thus, it becomes imperative here to study the perception gap as well as risk ambiguity which investors feel with reference to their mutual funds' investment decisions. Empirical research results provided that investors experience a significant difference in actual services offered by mutual fund than they have perceived. Moreover, research results have also revealed that investors perceive mutual funds as a risky investment but simultaneously the analysis of preferred score provides that they do not wish to take extreme low or high risk. These findings for investors' decision to assume risk level have implications similar to Simonson and Tversky, Benartzi and Thaler.

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“…The definition of measure of risk based on the expected values of utility and entropy (Yang and Qiu, 2005) is defined on the basis of the classical decision model under risk. Three parts are defined: the state space = {θ}, the action space A = {a}, and the payoff function X = X(a,θ), defined for A × Q.…”

Section: Utility-entropy Functionmentioning

confidence: 99%

Rainfall threshold definition using an entropy decision approach and radar data

Montesarchio

Ridolfi

Russo

et al. 2011

Nat. Hazards Earth Syst. Sci.

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Abstract. Flash flood events are floods characterised by a very rapid response of basins to storms, often resulting in loss of life and property damage. Due to the specific spacetime scale of this type of flood, the lead time available for triggering civil protection measures is typically short. Rainfall threshold values specify the amount of precipitation for a given duration that generates a critical discharge in a given river cross section. If the threshold values are exceeded, it can produce a critical situation in river sites exposed to alluvial risk. It is therefore possible to directly compare the observed or forecasted precipitation with critical reference values, without running online real-time forecasting systems. The focus of this study is the Mignone River basin, located in Central Italy. The critical rainfall threshold values are evaluated by minimising a utility function based on the informative entropy concept and by using a simulation approach based on radar data. The study concludes with a system performance analysis, in terms of correctly issued warnings, false alarms and missed alarms.

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A measure of risk and a decision-making model based on expected utility and entropy

Cited by 108 publications

References 31 publications

Discussing an Expected Utility and Weighted Entropy Framework

Discussing an Expected Utility and Weighted Entropy Framework

Perceptual gap and anatomy of investment risk decisions

Rainfall threshold definition using an entropy decision approach and radar data

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