Exam (elaborations)
IOP 3701 ASSIGNMENT 1
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QUESTION 1.1 Differentiate between the following terms/concepts a. Prospect and Probability Distribution • Prospect – A series of wealth outcomes, each of which is associated with a probability • Probability Distribution – A mathematical function that provides the probabilities of occurrence of different possible outcomes b. Utility Function and Expected Utility • Utility Function – A mathematical function which ranks alternatives according to utility to the individual • Expected Utility – Predicted utility value for one of several options, calculated as the sum of the utility of every possible outcome each multiplied by the probability of its occurrence c. Risk aversion, risk seeking and risk neutrality • Risk Aversion
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Institution
Johns Hopkins University
Course
IOP 3701 ASSIGNMENT 1
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Johns Hopkins University
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IOP 3701 ASSIGNMENT 1
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