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Asymmetric Choquet random walks and ambiguity aversion or seeking

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Abstract

Asymmetric Choquet random walks are defined, in the form of dynamically consistent random walks allowing for asymmetric conditional capacities. By revisiting Kast and Lapied (Dynamically consistent Choquet random walk and real investments. Document de Travail n. 2010-33, GREQAM, HAL id: halhs-00533826, 2010b) and Kast et al. (Econ Model, 38:495–503, 2014) we show that some findings regarding the effects of ambiguity aversion are preserved in the more general framework, which is of interest in several applications to policy making, risk management, corporate decisions, real option valuation of investment/ disinvestment projects, etc. The effect of ambiguity on the higher moments is investigated, as well, as they have an interpretation in terms of the psychological attitude of a decision-maker towards ambiguity. Finally, some financial applications are provided as an illustration.

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Notes

  1. A discussion on updating rules for Choquet capacities in a dynamic setting is offered in Chateauneuf et al. (2001) and in Lapied and Toquebeuf (2013).

  2. See Hackbarth (2009), for example.

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  1. Department of Mathematics, University of Bologna, Bologna, Italy

    Rossella Agliardi

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  1. Rossella Agliardi
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Correspondence to Rossella Agliardi.

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Agliardi, R. Asymmetric Choquet random walks and ambiguity aversion or seeking. Theory Decis 83, 591–602 (2017). https://doi.org/10.1007/s11238-017-9632-x

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  • DOI: https://doi.org/10.1007/s11238-017-9632-x

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