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​Evaluating gambles using dynamics

Link: https://aip.scitation.org/doi/10.1063/1.4940236

#Statistics #Gambling

🔗 Evaluating gambles using dynamics
Gambles are random variables that model possible changes in wealth. Classic decision theory transforms money into utility through a utility function and defines the value of a gamble as the expectation value of utility changes. Utility functions aim to capture individual psychological characteristics, but their generality limits predictive power. Expectation value maximizers are defined as rational in economics, but expectation values are only meaningful in the presence of ensembles or in systems with ergodic properties, whereas decision-makers have no access to ensembles, and the variables representing wealth in the usual growth models do not have the relevant ergodic properties. Simultaneously addressing the shortcomings of utility and those of expectations, we propose to evaluate gambles by averaging wealth growth over time. No utility function is needed, but a dynamic must be specified to compute time averages. Linear and logarithmic “utility functions” appear as transformations that generate ergodic ...
​Valuing Life as an Asset, as a Statistic and at Gunpoint

Ever wondered, how much your life is worth? This is an article about Life as an asset evaluation. It is extremely useful for insuarance companies and as a metric to calculate compensations in case of tragic events, but it is also a key to understand, how valuable (or not) life is.

Math is beautiful.

Link: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3156911

#math #life #insurance #statistics

🔗 Valuing Life as an Asset, as a Statistic and at Gunpoint by Julien Hugonnier, Florian Pelgrin, Pascal St-Amour :: SSRN