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Max Gunther (June 28, 1927 – June 28, 1998) [1] was an Anglo-American journalist and writer. He was the author of 26 books, including his investment best-seller, The Zurich Axioms.
In decision theory, the Ellsberg paradox (or Ellsberg's paradox) is a paradox in which people's decisions are inconsistent with subjective expected utility theory. John Maynard Keynes published a version of the paradox in 1921. [1]
That is, if portfolio always has better values than portfolio under almost all scenarios then the risk of should be less than the risk of . [2] E.g. If is an in the money call option (or otherwise) on a stock, and is also an in the money call option with a lower strike price.
An action axiom tests a condition (antecedent) and, if the condition has been met, then (consequent) it suggests (mandates) an action: from knowledge to action. A decision model may also be a network of connected decisions, information and knowledge that represents a decision-making approach that can be used repeatedly (such as one developed ...
Financial econometrics is the branch of financial economics that uses econometric techniques to parameterise the relationships identified. Mathematical finance is related in that it will derive and extend the mathematical or numerical models suggested by financial economics.
The axiom of regularity is of a restrictive nature as well. Therefore, one is led to the formulation of other axioms to guarantee the existence of enough sets to form a set theory. Some of these have been described informally above and many others are possible. Not all conceivable axioms can be combined freely into consistent theories.
In a discrete (i.e. finite state) market, the following hold: [2] The First Fundamental Theorem of Asset Pricing: A discrete market on a discrete probability space (,,) is arbitrage-free if, and only if, there exists at least one risk neutral probability measure that is equivalent to the original probability measure, P.
An axiomatic system is said to be consistent if it lacks contradiction.That is, it is impossible to derive both a statement and its negation from the system's axioms. Consistency is a key requirement for most axiomatic systems, as the presence of contradiction would allow any statement to be proven (principle of explo