IDEAS home Printed from https://ideas.repec.org/a/kap/theord/v83y2017i4d10.1007_s11238-017-9632-x.html
   My bibliography  Save this article

Asymmetric Choquet random walks and ambiguity aversion or seeking

Author

Listed:
  • Rossella Agliardi

    (University of Bologna)

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.

Suggested Citation

  • Rossella Agliardi, 2017. "Asymmetric Choquet random walks and ambiguity aversion or seeking," Theory and Decision, Springer, vol. 83(4), pages 591-602, December.
    • Handle: RePEc:kap:theord:v:83:y:2017:i:4:d:10.1007_s11238-017-9632-x
    DOI: 10.1007/s11238-017-9632-x
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s11238-017-9632-x
    File Function: Abstract
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s11238-017-9632-x?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Massimo Guidolin & Francesca Rinaldi, 2013. "Ambiguity in asset pricing and portfolio choice: a review of the literature," Theory and Decision, Springer, vol. 74(2), pages 183-217, February.
    2. Robert Kast & André Lapied, 2010. "Valuing future cash flows with non separable discount factors and non additive subjective measures: conditional Choquet capacities on time and on uncertainty," Theory and Decision, Springer, vol. 69(1), pages 27-53, July.
    3. Dongqing Zhu & Xiaofei Xie & Jiaqiu Xie, 2012. "When do people feel more risk? The effect of ambiguity tolerance and message source on purchasing intention of earthquake insurance," Journal of Risk Research, Taylor & Francis Journals, vol. 15(8), pages 951-965, September.
    4. Agliardi, Elettra & Sereno, Luigi, 2011. "The effects of environmental taxes and quotas on the optimal timing of emission reductions under Choquet–Brownian uncertainty," Economic Modelling, Elsevier, vol. 28(6), pages 2793-2802.
    5. Kast, Robert & Lapied, André & Roubaud, David, 2014. "Modelling under ambiguity with dynamically consistent Choquet random walks and Choquet–Brownian motions," Economic Modelling, Elsevier, vol. 38(C), pages 495-503.
    6. Alain Chateauneuf & Robert Kast & André Lapied, 2001. "Conditioning Capacities and Choquet Integrals: The Role of Comonotony," Theory and Decision, Springer, vol. 51(2), pages 367-386, December.
    7. André Lapied & Pascal Toquebeuf, 2013. "A note on “Re-examining the law of iterated expectations for Choquet decision makers”," Theory and Decision, Springer, vol. 74(3), pages 439-445, March.
    8. Robert Kast & André Lapied, 2010. "Dynamically consistent Choquet random walk and real investments," Working Papers halshs-00533826, HAL.
    9. David Kelsey & Willy Spanjers, 2004. "Ambiguity in Partnerships," Economic Journal, Royal Economic Society, vol. 114(497), pages 528-546, July.
    10. Robert Kast & André Lapied, 2010. "Dynamically consistent Choquet random walk and real investments," Working Papers hal-02817702, HAL.
    11. Agliardi, Elettra & Agliardi, Rossella & Spanjers, Willem, 2016. "Corporate financing decisions under ambiguity: Pecking order and liquidity policy implications," Journal of Business Research, Elsevier, vol. 69(12), pages 6012-6020.
    12. Nishimura, Kiyohiko G. & Ozaki, Hiroyuki, 2007. "Irreversible investment and Knightian uncertainty," Journal of Economic Theory, Elsevier, vol. 136(1), pages 668-694, September.
    13. Zengjing Chen & Larry Epstein, 2002. "Ambiguity, Risk, and Asset Returns in Continuous Time," Econometrica, Econometric Society, vol. 70(4), pages 1403-1443, July.
    14. André Lapied & Robert Kast, 2010. "Dynamically consistent Choquet random walk and real investments," Working Papers 10-21, LAMETA, Universtiy of Montpellier, revised 2010.
    15. Epstein, Larry G & Wang, Tan, 1994. "Intertemporal Asset Pricing Under Knightian Uncertainty," Econometrica, Econometric Society, vol. 62(2), pages 283-322, March.
    16. Hackbarth, Dirk, 2009. "Determinants of corporate borrowing: A behavioral perspective," Journal of Corporate Finance, Elsevier, vol. 15(4), pages 389-411, September.
    17. Merton, Robert C, 1969. "Lifetime Portfolio Selection under Uncertainty: The Continuous-Time Case," The Review of Economics and Statistics, MIT Press, vol. 51(3), pages 247-257, August.
    18. Elettra Agliardi & Rossella Agliardi & Willem Spanjers, 2015. "Convertible Debt: Financing Decisions and Voluntary Conversion under Ambiguity," International Review of Finance, International Review of Finance Ltd., vol. 15(4), pages 599-611, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Driouchi, Tarik & So, Raymond H.Y. & Trigeorgis, Lenos, 2020. "Investor ambiguity, systemic banking risk and economic activity: The case of too-big-to-fail," Journal of Corporate Finance, Elsevier, vol. 62(C).
    2. Rossella Agliardi, 2018. "Value-at-risk under ambiguity aversion," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 4(1), pages 1-13, December.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kast, Robert & Lapied, André & Roubaud, David, 2014. "Modelling under ambiguity with dynamically consistent Choquet random walks and Choquet–Brownian motions," Economic Modelling, Elsevier, vol. 38(C), pages 495-503.
    2. Agliardi, Elettra & Agliardi, Rossella & Spanjers, Willem, 2016. "Corporate financing decisions under ambiguity: Pecking order and liquidity policy implications," Journal of Business Research, Elsevier, vol. 69(12), pages 6012-6020.
    3. Driouchi, Tarik & Trigeorgis, Lenos & So, Raymond H.Y., 2020. "Individual antecedents of real options appraisal: The role of national culture and ambiguity," European Journal of Operational Research, Elsevier, vol. 286(3), pages 1018-1032.
    4. Gao, Yongling & Driouchi, Tarik, 2018. "Accounting for ambiguity and trust in partial outsourcing: A behavioral real options perspective," Journal of Business Research, Elsevier, vol. 92(C), pages 93-104.
    5. Tarik Driouchi & Lenos Trigeorgis & Raymond H. Y. So, 2018. "Option implied ambiguity and its information content: Evidence from the subprime crisis," Annals of Operations Research, Springer, vol. 262(2), pages 463-491, March.
    6. David Roubaud & Alain Lapied & Robert Kast, 2017. "Modelling under ambiguity with two correlated Choquet-Brownian motions," Economics Bulletin, AccessEcon, vol. 37(2), pages 1012-1020.
    7. Viviani, Jean-Laurent & Lai, Anh-Ngoc & Louhichi, Waël, 2018. "The impact of asymmetric ambiguity on investment and financing decisions," Economic Modelling, Elsevier, vol. 69(C), pages 169-180.
    8. Hwa-Sung Kim, 2023. "Effects of ambiguity on innovation strategies," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 9(1), pages 1-27, December.
    9. Driouchi, Tarik & So, Raymond H.Y. & Trigeorgis, Lenos, 2020. "Investor ambiguity, systemic banking risk and economic activity: The case of too-big-to-fail," Journal of Corporate Finance, Elsevier, vol. 62(C).
    10. Christoph Bühren & Fabian Meier & Marco Pleßner, 2023. "Ambiguity aversion: bibliometric analysis and literature review of the last 60 years," Management Review Quarterly, Springer, vol. 73(2), pages 495-525, June.
    11. Takao Asano, 2010. "Precautionary Principle and the Optimal Timing of Environmental Policy Under Ambiguity," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 47(2), pages 173-196, October.
    12. Agarwal, Vikas & Arisoy, Y. Eser & Naik, Narayan Y., 2017. "Volatility of aggregate volatility and hedge fund returns," Journal of Financial Economics, Elsevier, vol. 125(3), pages 491-510.
    13. Eisei Ohtaki, 2016. "Optimality of the Friedman rule under ambiguity," Working Papers e103, Tokyo Center for Economic Research.
    14. Kyoung Jin Choi & Hyeng Keun Koo & Do Young Kwak, 2004. "Optimal Stopping of Active Portfolio Management," Annals of Economics and Finance, Society for AEF, vol. 5(1), pages 93-126, May.
    15. Luis H. R. Alvarez E. & Soren Christensen, 2019. "A Class of Solvable Multidimensional Stopping Problems in the Presence of Knightian Uncertainty," Papers 1907.04046, arXiv.org.
    16. Miao, Jianjun & Wang, Neng, 2011. "Risk, uncertainty, and option exercise," Journal of Economic Dynamics and Control, Elsevier, vol. 35(4), pages 442-461, April.
    17. Jeleva, Meglena & Tallon, Jean-Marc, 2016. "Ambiguïté, comportements et marchés financiers," L'Actualité Economique, Société Canadienne de Science Economique, vol. 92(1-2), pages 351-383, Mars-Juin.
    18. Shi, Zhan, 2019. "Time-varying ambiguity, credit spreads, and the levered equity premium," Journal of Financial Economics, Elsevier, vol. 134(3), pages 617-646.
    19. Massimo Guidolin & Francesca Rinaldi, 2013. "Ambiguity in asset pricing and portfolio choice: a review of the literature," Theory and Decision, Springer, vol. 74(2), pages 183-217, February.
    20. Gao, Yongling & Driouchi, Tarik & Bennett, David J., 2018. "Ambiguity aversion in buyer-seller relationships: A contingent-claims and social network explanation," International Journal of Production Economics, Elsevier, vol. 200(C), pages 50-67.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:theord:v:83:y:2017:i:4:d:10.1007_s11238-017-9632-x. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.