Utility function estimation: the entropy approach

Autor:	Dionisio, Andreia, Reis, A. Heitor
Rok vydání:	2007
Předmět:	Quantitative Finance - Statistical Finance Physics - Data Analysis Statistics and Probability
Druh dokumentu:	Working Paper
DOI:	10.1016/j.physa.2008.02.072
Popis:	The maximum entropy principle can be used to assign utility values when only partial information is available about the decision maker's preferences. In order to obtain such utility values it is necessary to establish an analogy between probability and utility through the notion of a utility density function. According to some authors [Soofi (1990), Abbas (2006a) (2006b), Sandow et al. (2006), Friedman and Sandow (2006), Darooneh (2006)] the maximum entropy utility solution embeds a large family of utility functions. In this paper we explore the maximum entropy principle to estimate the utility function of a risk averse decision maker. Comment: 9 pages, paper presented at APFA 6 conference
Databáze:	arXiv
Externí odkaz:	http://arxiv.org/abs/0709.0591 Zobrazit plný text záznamu View this record from Arxiv