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Value without absolute convergence




We address how the value of risky options should be assessed in the case where the sum of the probability-weighted payoffs is not absolutely convergent and thus dependent on the order in which the terms are summed (e.g., as in the Pasadena Paradox). We develop and partially defend a proposal according to which options should be evaluated on the basis of agreement among admissible (e.g., convex and quasi-symmetric) covering sequences of the constituents of value (i.e., probabilities and payoffs).

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  • Luc LAUWERS & Peter VALLENTYNE, 2011. "Value without absolute convergence," Working Papers Department of Economics ces11.04, KU Leuven, Faculty of Economics and Business, Department of Economics.
  • Handle: RePEc:ete:ceswps:ces11.04

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