Dr B Grechuk, Prof S Utev
No more applications being accepted
Competition Funded PhD Project (Students Worldwide)
About the Project
Identifying and modeling of agent’s risk preferences is central to finance and economics applications. For example, expected utility theory (EUT) postulates that every risk-averse agent maximizes the expected value of the future uncertain payoff for some non-decreasing concave utility function. “Popular” utility functions include quadratic, power and negative exponential utilities. However, a general methodology for robustly identifying an exact form of the utility function for a given agent remains an open issue.
In the deterministic setting, the classical approach of Afriat (1967) finds a utility function that rationalises given (available) consumer’s demand data. Reny (2015) has recently extended this approach to the infinite data sets. This Ph.D. project aims to extend Afriat-Reny’s deterministic approach to identifying agent’s preferences in a risky environment, e.g. a financial market. However, a rationalising utility function is typically either non-unique or may not exist at all. Non-uniqueness will be resolved by identifying optimal/robust candidates based on specified criteria, whereas non-existence will be addressed by identifying approximate solutions for given data sets and by analysing their appropriateness for representing agent’s risk preferences. If approximate solutions are found to be unsatisfactory, an alternative theory for identifying agent’s risk preferences will be suggested.
Funding Notes
For UK Students: Fully funded College of Science and Engineering studentship available, 3 year duration.
For EU Students: Fully funded College of Science and Engineering studentship available, 3 year duration
For International (Non-EU) Students: Stipend and Home/EU level fee waiver available, 3 years duration. International students will need to provide additional funds for remainder of tuition fees.
Please direct informal enquiries to the project supervisor.
If you wish to apply formally, please do so via: https://www2.le.ac.uk/colleges/scieng/research/pgr and selecting the project from the list.
References
Afriat, S. N. "The construction of utility functions from expenditure data." International econ. rev. 8.1 (1967): 67-77.
Grechuk, Bogdan, and Michael Zabarankin. "Inverse portfolio problem with mean-deviation model." European Journal of Operational Research 234.2 (2014): 481-490.
Grechuk, Bogdan, and Michael Zabarankin. "Inverse portfolio problem with coherent risk measures." European Journal of Operational Research 249.2 (2016): 740-750.
Polisson, Matthew, John K-H. Quah, and Ludovic Renou. Revealed preferences over risk and uncertainty. No. W15/25. IFS Working Papers, 2015.
Reny, Philip J. "A characterization of rationalizable consumer behavior." Econometrica 83.1 (2015): 175-192.
Varian, Hal R. "Revealed preference." Samuelsonian economics and the twenty-first century (2006): 99-115.
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