Expected Utility Inequalities

41 Pages Posted: 6 May 2006

See all articles by Eduardo Zambrano

Eduardo Zambrano

California State Polytechnic University, San Luis Obispo - Economics

Date Written: January 2, 2006

Abstract

Suppose we know the utility function of a risk averse decision maker who values a risky prospect X at a price CE. Based on this information alone I develop upper bounds for the tails of the probabilistic belief about X of the decision maker. I also illustrate how to use these expected utility bounds in a variety of applications, which include the estimation of risk measures from observed data, option valuation, credit risk and the equity premium puzzle.

Keywords: Expected Utility Theory, Elicitation of Subjective Beliefs

JEL Classification: D90

Suggested Citation

Zambrano, Eduardo, Expected Utility Inequalities (January 2, 2006). Available at SSRN: https://ssrn.com/abstract=899372 or http://dx.doi.org/10.2139/ssrn.899372

Eduardo Zambrano (Contact Author)

California State Polytechnic University, San Luis Obispo - Economics ( email )

Orfalea College of Business
San Luis Obispo, CA 93407
United States
805-756-5327 (Phone)
805-756-1473 (Fax)

HOME PAGE: http://calpoly.edu/~ezambran

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