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What is Foundations of Expected Utility Theory about?
Chapter 1 discusses the foundations of finance, focusing on expected utility theory and its assumptions regarding rational decision-making under risk and uncertainty. It explains key concepts such as utility functions, prospects, and risk aversion, while also highlighting the limitations of expected utility theory, including the Allais paradox. Alternative theories like prospect theory are introduced as responses to these limitations.
- Author
- PRATIK JAIN
- Language
- EN