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Topic: Certainty equivalent

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	Certainty Equivalent Wealth - Wolfram Demonstration Project
		This graphic visualizes the certainty equivalent wealth of a "lottery," meaning the amount of money which, if held, would yield with absolute certainty the same expected utility to someone as the lottery.
		The concept of certainty equivalent wealth is central to the understanding of rational behavior under uncertainty and to the regulation of behavior in such circumstances.
		The Demonstration presents a simple model in which the user may vary three sliders: the probability that the individual will be in position 1, the wealth associated with position 1, and the wealth associated with position 2.
	demonstrations.wolfram.com /CertaintyEquivalentWealth (134 words)

	[No title]
		Certainty Equivalent A certainty equivalent is a certain payoff value which is equivalent, for the decision maker, to a particular payoff distribution.
		If the decision maker can determine his or her certainty equivalent for the payoff distribution of each strategy, then the optimal strategy is the one with the highest certainty equivalent.
		The certainty equivalent is the minimum selling price for a payoff distribution; it depends on the decision maker's personal attitude toward risk.
	web.utk.edu /~noon/treenote.doc (2397 words)

	Combining Preference Theory and CAPM Efficient Frontier - Palisade Corporation
		Derived from the utility function is the idea of the certainty equivalent, which is the amount the decision-make would pay for the risky investment.
		Maximizing this certainty equivalent means maximizing the value of the investment for the decision-maker.
		Now the goal of the optimization is to maximize the certainty equivalent by changing the participation levels in the four projects.
	www.palisade.com /articles/motta_preftheory.asp (1573 words)

	The Ohio State University (Site not responding. Last check: )
		The certainty equivalent of the real income on the top two terminal nodes is 97.15.
		The certainty equivalent of the real income on the bottom two terminal nodes is 95.3.
		Hence, the certainty equivalent of holding the asset in 1997 is approximately 92.4.
	economics.sbs.ohio-state.edu /efisher/econ625/ANS3.html (204 words)

	CivLaw (Site not responding. Last check: )
		The expected gain due to the legal change is normalized to 1 (100%) and is on the vertical Z-axis which measures the preference of individuals by asking what certain fraction of that gain they would consider equivalent to the uncertain gain.
		This is the notion of "certainty equivalent." Obviously the riskier the gamble and the more risk-averse the individual, the smaller a fraction does certainty-equivalent becomes.
		Given an individual's level of risk aversion, dividing the legal change over more periods is always preferable (increases the certainty equivalent), particularly in the first periods and particularly when risk aversion is more pronounced.
	www.iulaw.indy.indiana.edu /instructors/Georgakopoulos/Prof/civlaw.htm (337 words)

	EconPort - Handbook - Decision-Making Under Uncertainty - Risk Aversion
		The certainty equivalent of any gamble g is that amount of money, call it CE, offered for certain, which gives the consumer exactly the same utility as the gamble.
		Risk Premium = E(g) - CE It follows that a risk-averse person's certainty equivalent will be less than the expected value of the gamble, and they will have a positive risk-premium.
		Similarly, a risk-loving consumer will have a negative risk-premium, since she would need an extra incentive to accept the expected value, not the risky gamble, and her certainty equivalent would be greater than the expected value of the gamble.
	www.econport.org /econport/request?page=man_ru_basics4 (967 words)

	[No title]
		Ranking alternatives by their certainty equivalents is the same as ranking them by their expected utilities.ó¨ Risk Attitude¨The notation of a Risk Premium can be thought of as a measure of how risk-averse a decision maker is in regard to a particular risky situation.
		The risk premium is defined as the difference between the EMV and the certainty equivalent.
		Risk Premium=EMV - Certainty Equivalent ªó¨Risk Attitudes¨ÓCertainty equivalent is a dollar amount, whereas expected utility is in utility units A certainty equivalent is not the same as the expected utility The two measurements translate through the utility function.
	www.ecs.csun.edu /~hamidg/chapter13.ppt (277 words)

	Game Theory .net - Risk and Certainty Equivalent Applet
		A certainty equivalent is the minimum amount of money I would rather have for certain instead of taking some risk.
		The more risk-averse a person is, the lower is her certainty equivalent.
		The computer will calculate the certainty equivalent for you, allowing you to visualize the effect of risk tolerance.
	www.gametheory.net /Mike/applets/Risk (1174 words)

	[No title]
		Risk, in those cases, is primarily a function of the certainty associated with the anticipated sales price.
		An early step in determining certainty equivalents is to carefully explain to the investor the expected future business environment.
		After being acquainted with major risk factors, the client is asked to indicate a preference for forecasted cash flows or specified riskless cashflow alternatives.
	www.dearborn.com /download/Invanalysis/Chapter16Outline.doc (1002 words)

	Glossary of research economics
		The analysis of covariance F tests are equivalent to testing whether the coefficient of the dummies are significantly different from one another.
		For a risk averse agent (as most are assumed to be) the certainty equivalent is less than the expected value of the gamble because the agent prefers to reduce uncertainty.
		Equivalently: The intersection of individually rational allocations with the Pareto efficient allocations.
	www.econterms.com /econtent.html (14590 words)

	Lesson 4 (Site not responding. Last check: )
		The prospect, b, is called the certainty equivalent of the uncertain
		equivalent of the bundle z is the gamble b = (c,a;p).
		Using Taylor's series, expand both sides of the above equation, ignoring higher order terms and using a simple linear approximation for the right-hand side since p is a fixed amount, and a quadratic expansion of the left-hand side since h exhibits random variability.
	www.georgetown.edu /faculty/poiriere/micro/lessons/lesson4.html (1573 words)

	Certainty Equivalent Analysis - BJ21.com
		The definition of CE is relatively simple: it is the minimum profit (percentage or absolute) one would require to forfeit an advantageous and risky investment opportunity.
		Equivalently, it is the maximum profit one would be willing to pay for entering such an investment opportunity.
		Now, making 1 million such bets is for practical purposes equivalent to making one bet per minute, with million times higher edge and thousand times higher risk.
	www.bj21.com /bj_reference/pages/certaintyequivalentanalysis.shtml (1334 words)

	ECO 018 Mathematical Economics: David Collard
		This is the income or pay-off with certainty giving the same expected utility as the uncertain outcome.
		The individual in this example would be indifferent between a 50;50 chance of 100 and the certainty of 25.
		We use a diminishing marginal utility diagram to illustrate the construction of a cardinal utility function, expected pay-off, expected utility and certainty equivalent income.
	people.bath.ac.uk /hssdac/maths-2001-2/maths-2001-2-topic-11.htm (443 words)

	Theory of Risk Aversion
		As is obvious from Figure 1, the utility of this allocation is equal to the expected utility of the random prospect, i.e.
		Thus, lottery C(z) with certainty is known as the certainty-equivalent lottery, i.e.
		This is equivalent to the situation where all wealth is held in the form of the riskless asset, i.e.
	cepa.newschool.edu /het/essays/uncert/aversion.htm (6248 words)

	Power in Numbers: Mastering the Math You Think You Know
		Why the shapes of the utility functions pictured above represent risk-seeking, risk-aversion, and risk-neutrality can be made more clear by considering a certainty equivalent (CE).
		These numbers ($75, $25, and $50) are called certainty equivalents.
		A certainty equivalent is the minimum amount of money I would rather have for certain instead of taking some risk.
	www.umich.edu /~numbers/probability/probability9a.html (555 words)

	Simtools and Formlist add-ins for Excel
		CE(incomes, RiskTolConst, RiskTolSlope) returns the certainty equivalent of a random draw from the incomes range, for a decision-maker with constant risk tolerance (or linear risk tolerance when the optional RiskTolSlope parameter is used).
		When the risk tolerance is positive number, the CE value is between the minimum and the average of the income values, and the CE becomes closer to the average as the risk tolerance becomes larger.
		CEPR(values, probabilities, RiskTolConst, testCells, criterion) returns the certainty equivalent, for a decision-maker with constant risk tolerance, of a random income drawn from the specified values according to the corresponding probabilities, conditional on the event where the corresponding test cells (if any) match the criterion.
	home.uchicago.edu /~rmyerson/addins.htm (3224 words)

	CHAPTER 31
		This point of view is based largely on an unrealistic concept of ”certainty.“ It is true that no physicai statement can be verified with what we may call mathematical certainty, in which the probability of error is zero.
		But from a practical standpoini, this physical certainty is fully equivalent to mathematical certainty.
		In this connection, it is important to recognize that scientific statements can be verified only if they are properly expressed so that they stay within the limits to which comparisons with observation can be made.
	www.reciprocalsystem.com /um/um31.htm (5605 words)

	Amazon.com: "certainty equivalent rate": Key Phrase page
		investments when choosing between a risky portfolio and a safe one, we may interpret a portfolio's utility value as its "certainty equivalent" rate of return to an investor.
		That is, the certainty equiv- alent rate of a portfolio is the rate that...
		To see this define the certainty equivalent rate of return, 0", by the equation u(y, - a, yz + all + 0")) = E{u(y, - a, y, +...
	www.amazon.com /phrase/certainty-equivalent-rate (379 words)

	SSRN-Introduction to a Theory of Value Coherent with the No-Arbitrage Principle by Marco Frittelli
		Value is a non trivial extension of the certainty equivalent since it takes into consideration the possibility of partially hedging the risk carried by the claim.
		When the risk may not even be partially covered, this Value is the certainty equivalent.
		Between these two cases just some of the risk may be hedged and the no arbitrage principle requires the price to lie in the "arbitrage interval".
	papers.ssrn.com /sol3/papers.cfm?abstract_id=228735 (215 words)

	Risk aversion: Facts and details from Encyclopedia Topic (Site not responding. Last check: )
		The amount accepted is called the certainty equivalent[Click link for more facts about this topic], EHandler: no quick summary.
		The graph shows this situation for the risk-averse player: The utility of the bet, EHandler: no quick summary.
		(is as big as that of the certainty equivalence, EHandler: no quick summary.
	www.absoluteastronomy.com /encyclopedia/r/ri/risk_aversion.htm (1412 words)

	Kelly FAQ
		This worth is called the "Certainty Equivalent" and it provides a way to compare different bets and betting strategies.
		Your "certainty equivalent" (or risk-free equivalent) is the amount that participation in the bet is worth to you.
		This is the "certainty equivalent" of the above bet for you if you are a Kelly better with the Kelly Number 0.3 and with a $10,000 bankroll.
	www.bjmath.com /bjmath/kelly/kellyfaq.htm (3020 words)

	Certainty Equivalent Methods (Site not responding. Last check: )
		We begin with the most conceptually straightforward method: first, learn the T and R functions by exploring the environment and keeping statistics about the results of each action; next, compute an optimal policy using one of the methods of Section 3.
		This method is known as certainty equivlance [57].
		A variation on this idea is certainty equivalence, in which the model is learned continually through the agent's lifetime and, at each step, the current model is used to compute an optimal policy and value function.
	www.cs.washington.edu /research/jair/volume4/kaelbling96a-html/node28.html (285 words)

	CEPR Discussion Paper Abstracts
		Unlike the (Nash) solution provided by Cukierman and Meltzer, the dynamic optimization problem facing the monetary authority in this case is not of a linear quadratic form and certainty equivalence does not apply.
		The learning behavior of the private sector (regarding the policymaker's preferences) becomes intimately linked with the choice of the optimal policy and cannot be separated as in the certainty equivalent case.
		Once the dual effect of the optimal Stackelberg policy is recognized, the monetary authority has an additional channel of influence to consider beyond that taken into account by sub-optimal, certainty equivalent, Nash policy rules.
	www.cepr.org /pubs/dps/DP338.asp (254 words)

	MIT Blackjack Team: Interview with Team Manager Johnny C
		The certainty equivalent for that situation is that number where you become indifferent.
		Even though the expectation of one is greater, you have to subtract off something for the variance.
		There are four parameters associated with the c.e.
	www.blackjackforumonline.com /content/interviewJC.htm (9080 words)

	Certainty Equivalent
		The certainty equivalent (CE) is that amount of money one would accept to avoid the risk of the venture.
		If we had to choose one of two options, say, enter the business or save X dollars by not entering it, what is the value of X, the CE of the risky venture, that would make us indifferent between the two options?
		This could be useful to the marketing manager opting for running a marketing research study, as long as the cost of the study does not exceed the risk premium.
	www.marketingstat.com /dttech10.htm (140 words)

	Certainty Equivalents
		One problem with using utility rather than monetary value is that it is difficult to understand what the numbers mean and almost impossible to explain them to someone else.
		This value is often called a certainty equivalent.
		In fact, it is quite easy to translate values between certainty equivalents and utility.
	www.vanguardsw.com /dphelp4/dph00090.htm (287 words)

	[No title] (Site not responding. Last check: )
		The certainty equivalent of a random variable Y in the set of all random variables = x in X s.t.
		DF1: forall x in X, C(x) is a certainty equivalent
		With u unique up to linear transformations (u'=au for some a in R-{0}) This theorem is generalizable to non-simple bounded lotteries.
	www.cs.cmu.edu /~jcl/classnotes/decision_theory/certainty_equivalent.html (110 words)

	certainty - OneLook Dictionary Search
		Certainty : Online Plain Text English Dictionary [home, info]
		Certainty : Deardorff's Glossary of International Economics [home, info]
		Phrases that include certainty: certainty equivalence principle, certainty equivalent return, certainty factor, certainty principle, clear certainty rundown, more...
	www.onelook.com /?w=certainty&ls=a (201 words)

	Glossary
		The certainty equivalent represents the maximum amount of money we are willing to pay for some gamble.
		In other words, it is the minimum amount of money I would rather have for certain instead of taking some risk.
		In practice, we either can't measure these initial conditions sufficiently precisely, or we don't care to do it.
	www.umich.edu /~numbers/glossary.html (2139 words)

	Car Insurance - Car Insurance Costs (Site not responding. Last check: )
		New England's third largest banking and financial services company headquartered in Portland, Maine....
		Game Theory and Business Strategy: Risk and Certainty Equivalent...
		A discussion of risk and uncertainty and an applet demonstrating how to calculate a certainty equivalent...
	www.car-insurance.resourcepage.info /carinsurancecosts (778 words)

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