Utility, Rationality and Beyond: From Behavioral Finance to Informational Finance By Sukanto Bhattacharya
| Date: 21 November 2010, 06:37
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Sukanto Bhattacharya, «Utility, Rationality and Beyond: From Behavioral Finance to Informational Finance (Ph. D. Dissertation at Bond University, Australia)»
Publisher: Hexis (May 31, 2005) | ISBN-10: 1931233853 | ISBN-13: 978-1931233859 | 133 Pages | PDF | 0.4 MB
This work has been wholly adapted from the dissertation submitted by the author in 2004 to the Faculty of Information Technology, Bond University, Australia in fulfillment of the requirements for his doctoral qualification in Computational Finance. This work covers a substantial mosaic of related concepts in utility theory as applied to financial decision-making. The main body of the work is divided into four relevant chapters. The first chapter takes up the notion of resolvable risk i.e. systematic investment risk which may be attributed to actual market movements as against irresolvable risk which is primarily born out of the inherent imprecision associated with the information gleaned out of market data such as price, volume, open interest etc. A neutrosophic model of risk classification is proposed – neutrosophic logic being a new branch of mathematical logic which allows for a three-way generalization of binary fuzzy logic by considering a third, neutral state in between the high and low states associated with binary logic circuits. A plausible application of the postulated model is proposed in reconciliation of price discrepancies in the long-term options market where the only source of resolvable risk is the long-term implied volatility. The chapter postulates that inherent imprecision in the way market information is subjectively processed by psycho-cognitive factors governing human decision-making actually contributes to the creation of heightened risk appraisals. Such heightened notions of perceived risk make investors predisposed in favor of safe investments even when pure economic reasoning may not entirely warrant such a choice. To deal with this information fusion problem a new combination rule has been proposed - the Dezert-Smarandache combination rules of paradoxist sources of evidence, which looks for the basic probability assignment or bpa denoted as m (.) = m1(.)(+)m2(.) that maximizes the joint entropy of the two information sources.
About the Author
Sukanto Bhattacharya was born on 13th January, 1975 in the city of Calcutta, India. He grew up and went to school and later attended the well-renowned St. Xavier’s College in the same city. He obtained his MBA degree with specialization in Operations Research from Institute of Business Management, Jadavpur University, Calcutta, India in 1999 and his PhD degree in Computational Finance from the Faculty of Information Technology, Bond University, Australia in 2004. His doctoral research concentrated on the application of information theoretic tools in financial decision-making. He was the recipient of a prestigious Postgraduate Fellowship for his doctoral studies; jointly offered by the Faculties of Business and Information Technology, Bond University. Dr. Bhattacharya taught courses in finance and quantitative methods at undergraduate as well as graduate levels at Bond University and Deakin University in Australia before joining Alaska Pacific University in May, 20! 05 as an Assistant Professor of Finance and Director of their MBA – Global Finance program. Dr. Bhattacharya has published extensively in international journals, conference proceedings and peer-reviewed monographs on a wide variety of subjects ranging from forensic accounting to quantum metaphysics. Some of the journals that have either published or accepted his work for future publication are Advances in Financial Planning and Forecasting, International Journal of Social Economics and the Review of Accounting and Finance. Dr. Bhattacharya has also been a reviewer in a number of international publications on statistics, finance and related areas.
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