An analysis of risky financial decisions

A. Mehrez, U. Regev, A. Spivak

Research output: Contribution to journalArticlepeer-review

2 Scopus citations

Abstract

A problem of financing uncertain cost of a project is investigated. The paper analyses the allocation and the loss due to the cost uncertainty. Different formulations of the problem are suggested and compared: expected profits, chance constraint maximization and a utility approach. It is shown that even a risk‐neutral manager is willing to pay a premium to reduce uncertainty. The two approaches to risk, chance constraint versus concave utility, are shown to be non‐equivalent.

Original languageEnglish
Pages (from-to)19-24
Number of pages6
JournalManagerial and Decision Economics
Volume5
Issue number1
DOIs
StatePublished - 1 Jan 1984

ASJC Scopus subject areas

  • Business and International Management
  • Strategy and Management
  • Management Science and Operations Research
  • Management of Technology and Innovation

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