Some Applications in Economy for Utility Functions Involving Risk Theory
Abstract We present in the first part of the article types of utility functions that can describe the behavior of the investor and their applications to optimize portfolio. The second part of the paper refers to applications in calculating insurance premiums aggregated risk in zero utility principle.
An Introduction to Utility Theory
A gentle but reasonably rigorous introduction to utility theory. Utility functions give us a way to measure investor’s preferences for wealth and the amount of risk they are willing to undertake in the hope of attaining greater wealth. This makes it possible to develop a theory of portfolio optimization. Thus utility theory lies at the heart of modern portfolio theory. We develop the basic concepts of the theory through a series of simple examples. We discuss non-satiation, risk aversion, the principle of expected utility maximization, fair bets, certainty equivalents, portfolio optimization, coecients of risk aversion, iso-elasticity, relative risk aversion, and absolute risk aversion.
Fiscal Transparency in EU Accession Countries Progress and Future Challenges
This paper discusses the findings of fiscal transparency reports on standards and codes (ROSCs) for most EU accession candidate countries. Emphasis is given to the need to establish effective and accountable medium-term budget frameworks to establish policy credibility and anchor adjustment programs to meet EU fiscal goals. Adoption of budgeting and accounting standards consistent with the IMF Government Finance Statistics Manual 2001 framework will also help link budget decisions to EU standards of fiscal reporting. More consistent and comprehensive coverage of off-budget activities is needed for assessing fiscal risk and sustainability. Finally, local government issues need to be addressed by many of these countries since EU fiscal goals are set with reference to general government. Progress in all of these areas can be monitored by keeping fiscal ROSC assessments up to date.