微观经济学及财务知识分析范文.pptx

《微观经济学及财务知识分析范文.pptx》由会员分享，可在线阅读，更多相关《微观经济学及财务知识分析范文.pptx（135页珍藏版）》请在淘文阁 - 分享文档赚钱的网站上搜索。

1、Chapter 5Choice Under Uncertainty1Chapter 1Topics to be DiscussednDescribing RisknPreferences Toward RisknReducing RisknThe Demand for Risky Assets2Chapter 1IntroductionnChoice with certainty is reasonably straightforward.nHow do we choose when certain variables such as income and prices are uncerta

2、in (i.e. making choices with risk)?3Chapter 1Describing RisknTo measure risk we must know:1) All of the possible outcomes.2) The likelihood that each outcome will occur (its probability).4Chapter 1Describing RisknInterpreting ProbabilitylThe likelihood that a given outcome will occur5Chapter 1Descri

3、bing RisknInterpreting ProbabilitylObjective InterpretationuBased on the observed frequency of past events6Chapter 1Describing RisknInterpreting ProbabilitylSubjectiveuBased on perception or experience with or without an observed frequencylDifferent information or different abilities to process the

4、same information can influence the subjective probability7Chapter 1Describing RisknExpected ValuelThe weighted average of the payoffs or values resulting from all possible outcomes.uThe probabilities of each outcome are used as weightsuExpected value measures the central tendency; the payoff or valu

5、e expected on average8Chapter 1Describing RisknAn ExamplelInvestment in offshore drilling exploration:lTwo outcomes are possibleuSuccess - the stock price increase from $30 to $40/shareuFailure - the stock price falls from $30 to $20/share9Chapter 1Describing RisknAn ExamplelObjective Probabilityu10

6、0 explorations, 25 successes and 75 failuresuProbability (Pr) of success = 1/4 and the probability of failure = 3/410Chapter 1Describing RisknAn Example:e)($20/sharPr(failuree)($40/sharPr(success EV )($20/share43)($40/share41 EV $25/share EV Expected Value (EV)11Chapter 1Describing RisknGiven:lTwo p

7、ossible outcomes having payoffs X1 and X2lProbabilities of each outcome is given by Pr1 & Pr212Chapter 1Describing RisknGenerally, expected value is written as:nn2211XPr.XPrXPr E(X)13Chapter 1Describing RisknVariabilitylThe extent to which possible outcomes of an uncertain even may differ14Chapter 1

8、Describing RisknA ScenariolSuppose you are choosing between two part-time sales jobs that have the same expected income ($1,500)lThe first job is based entirely on commission.lThe second is a salaried position.Variability15Chapter 1Describing RisknA ScenariolThere are two equally likely outcomes in

9、the first job-$2,000 for a good sales job and $1,000 for a modestly successful one.lThe second pays $1,510 most of the time (.99 probability), but you will earn $510 if the company goes out of business (.01 probability).Variability16Chapter 1Income from Sales JobsJob 1: Commission.52000.510001500Job

10、 2: Fixed salary.991510.015101500ExpectedProbabilityIncome ($)Probability Income ($)IncomeOutcome 1Outcome 2Describing Risk17Chapter 11500$ .5($1000).5($2000)E(X1nJob 1 Expected Income$1500.01($510).99($1510) )E(X2nJob 2 Expected IncomeIncome from Sales JobsDescribing Risk18Chapter 1nWhile the expec

11、ted values are the same, the variability is not.nGreater variability from expected values signals greater risk.nDeviationlDifference between expected payoff and actual payoffDescribing Risk19Chapter 1Deviations from Expected Income ($)Job 1$2,000$500$1,000-$500Job 21,51010510-900 Outcome 1 Deviation

12、 Outcome 2 DeviationDescribing Risk20Chapter 1nAdjusting for negative numbersnThe standard deviation measures the square root of the average of the squares of the deviations of the payoffs associated with each outcome from their expected value.VariabilityDescribing Risk21Chapter 1Describing RisknThe

13、 standard deviation is written:222211)(Pr)(PrXEXXEXVariability22Chapter 1Calculating Variance ($)Job 1$2,000$250,000$1,000 $250,000 $250,000 $500.00Job 21,510100510 980,100 9,900 99.50DeviationDeviation Deviation Standard Outcome 1 SquaredOutcome 2 Squared Squared DeviationDescribing Risk23Chapter 1

14、Describing RisknThe standard deviations of the two jobs are:50.99900, 9$ 00).01($980,1.99($100)500000,250$0.5($250,000).5($250,00222111*Greater Risk24Chapter 1Describing RisknThe standard deviation can be used when there are many outcomes instead of only two.25Chapter 1Describing RisknJob 1 is a job

15、 in which the income ranges from $1000 to $2000 in increments of $100 that are all equally likely.Example26Chapter 1Describing RisknJob 2 is a job in which the income ranges from $1300 to $1700 in increments of $100 that, also, are all equally likely.Example27Chapter 1Outcome Probabilities for Two J

16、obsIncome0.1$1000$1500$20000.2Job 1Job 2Job 1 has greater spread: greaterstandard deviationand greater riskthan Job 2.Probability28Chapter 1Describing RisknOutcome Probabilities of Two Jobs (unequal probability of outcomes)lJob 1: greater spread & standard deviationlPeaked distribution: extreme payo

17、ffs are less likely29Chapter 1Describing RisknDecision MakinglA risk avoider would choose Job 2: same expected income as Job 1 with less risk.lSuppose we add $100 to each payoff in Job 1 which makes the expected payoff = $1600.30Chapter 1Unequal Probability OutcomesJob 1Job 2The distribution of payo

18、ffsassociated with Job 1 has a greater spread and standarddeviation than those with Job 2.Income0.1$1000$1500$20000.2Probability31Chapter 1Income from Sales Jobs-Modified ($)Recall: The standard deviation is the square root of the deviation squared.Job 1$2,100$250,000$1,100$250,000$1,600$500Job 2151

19、0100510980,1001,500 99.50DeviationDeviation ExpectedStandard Outcome 1 SquaredOutcome 2 SquaredIncomeDeviation32Chapter 1Describing RisknJob 1: expected income $1,600 and a standard deviation of $500.nJob 2: expected income of $1,500 and a standard deviation of $99.50nWhich job?lGreater value or les

20、s risk?Decision Making33Chapter 1nSuppose a city wants to deter people from double parking.nThe alternatives .Describing RiskExample34Chapter 1nAssumptions:1) Double-parking saves a person $5 in terms of time spent searching for a parking space.2) The driver is risk neutral.3) Cost of apprehension i

21、s zero.ExampleDescribing Risk35Chapter 1nA fine of $5.01 would deter the driver from double parking.lBenefit of double parking ($5) is less than the cost ($5.01) equals a net benefit that is less than 0.ExampleDescribing Risk36Chapter 1nIncreasing the fine can reduce enforcement cost:lA $50 fine wit

22、h a .1 probability of being caught results in an expected penalty of $5.lA $500 fine with a .01 probability of being caught results in an expected penalty of $5.ExampleDescribing Risk37Chapter 1nThe more risk averse drivers are, the lower the fine needs to be in order to be effective.ExampleDescribi

23、ng Risk38Chapter 1Preferences Toward RisknChoosing Among Risky AlternativeslAssumeuConsumption of a single commodityuThe consumer knows all probabilitiesuPayoffs measured in terms of utilityuUtility function given39Chapter 1Preferences Toward RisknA person is earning $15,000 and receiving 13 units o

24、f utility from the job.nShe is considering a new, but risky job.Example40Chapter 1Preferences Toward RisknShe has a .50 chance of increasing her income to $30,000 and a .50 chance of decreasing her income to $10,000.nShe will evaluate the position by calculating the expected value (utility) of the r

25、esulting income.Example41Chapter 1Preferences Toward RisknThe expected utility of the new position is the sum of the utilities associated with all her possible incomes weighted by the probability that each income will occur.Example42Chapter 1Preferences Toward RisknThe expected utility can be writte

26、n:lE(u) = (1/2)u($10,000) + (1/2)u($30,000) = 0.5(10) + 0.5(18) = 14lE(u) of new job is 14 which is greater than the current utility of 13 and therefore preferred.Example43Chapter 1Preferences Toward RisknDifferent Preferences Toward RisklPeople can be risk averse, risk neutral, or risk loving.44Cha

27、pter 1Preferences Toward RisknDifferent Preferences Toward RisklRisk Averse: A person who prefers a certain given income to a risky income with the same expected value.lA person is considered risk averse if they have a diminishing marginal utility of incomeuThe use of insurance demonstrates risk ave

28、rsive behavior.45Chapter 1Preferences Toward RisknA ScenariolA person can have a $20,000 job with 100% probability and receive a utility level of 16.lThe person could have a job with a .5 chance of earning $30,000 and a .5 chance of earning $10,000.Risk Averse46Chapter 1Preferences Toward RisknExpec

29、ted Income = (0.5)($30,000) + (0.5)($10,000) = $20,000Risk Averse47Chapter 1Preferences Toward RisknExpected income from both jobs is the same - risk averse may choose current jobRisk Averse48Chapter 1Preferences Toward RisknThe expected utility from the new job is found:lE(u) = (1/2)u ($10,000) + (

30、1/2)u($30,000)lE(u) = (0.5)(10) + (0.5)(18) = 14uE(u) of Job 1 is 16 which is greater than the E(u) of Job 2 which is 14.Risk Averse49Chapter 1Preferences Toward RisknThis individual would keep their present job since it provides them with more utility than the risky job.nThey are said to be risk av

31、erse.Risk Averse50Chapter 1Income ($1,000)UtilityThe consumer is riskaverse because shewould prefer a certainincome of $20,000 to agamble with a .5 probabilityof $10,000 and a .5probability of $30,000.E101015201314161801630ABCDRisk AversePreferences Toward Risk51Chapter 1Preferences Toward RisknA pe

32、rson is said to be risk neutral if they show no preference between a certain income, and an uncertain one with the same expected value.Risk Neutral52Chapter 1Income ($1,000)1020Utility0306AEC1218The consumer is riskneutral and is indifferentbetween certain eventsand uncertain eventswith the same exp

33、ected income.Preferences Toward RiskRisk Neutral53Chapter 1Preferences Toward RisknA person is said to be risk loving if they show a preference toward an uncertain income over a certain income with the same expected value.lExamples: Gambling, some criminal activityRisk Loving54Chapter 1Income ($1,00

34、0)Utility03102030AEC818The consumer is riskloving because shewould prefer the gamble to a certain income.Preferences Toward RiskRisk Loving55Chapter 1Preferences Toward RisknThe risk premium is the amount of money that a risk-averse person would pay to avoid taking a risk.Risk Premium56Chapter 1Pref

35、erences Toward RisknA ScenariolThe person has a .5 probability of earning $30,000 and a .5 probability of earning $10,000 (expected income = $20,000).lThe expected utility of these two outcomes can be found:uE(u) = .5(18) + .5(10) = 14Risk Premium57Chapter 1Preferences Toward RisknQuestionlHow much

36、would the person pay to avoid risk?Risk Premium58Chapter 1Income ($1,000)Utility01016Here , the risk premiumis $4,000 because a certain income of $16,000gives the person the sameexpected utility as the uncertain income thathas an expected value of $20,000.101830402014ACEG20FRisk PremiumPreferences T

37、oward RiskRisk Premium59Chapter 1Preferences Toward RisknVariability in potential payoffs increase the risk premium.nExample:lA job has a .5 probability of paying $40,000 (utility of 20) and a .5 chance of paying 0 (utility of 0).Risk Aversion and Income60Chapter 1Preferences Toward RisknExample:lTh

38、e expected income is still $20,000, but the expected utility falls to 10.lExpected utility = .5u($) + .5u($40,000) = 0 + .5(20) = 10Risk Aversion and Income61Chapter 1Preferences Toward RisknExample:lThe certain income of $20,000 has a utility of 16.lIf the person is required to take the new positio

39、n, their utility will fall by 6.Risk Aversion and Income62Chapter 1Preferences Toward RisknExample:lThe risk premium is $10,000 (i.e. they would be willing to give up $10,000 of the $20,000 and have the same E(u) as the risky job.Risk Aversion and Income63Chapter 1Preferences Toward RisknTherefore,

40、it can be said that the greater the variability, the greater the risk premium.Risk Aversion and Income64Chapter 1Preferences Toward RisknCombinations of expected income & standard deviation of income that yield the same utilityIndifference Curve65Chapter 1Risk Aversion andIndifference CurvesStandard

41、 Deviation of Income ExpectedIncomeHighly Risk Averse:Anincrease in standarddeviation requires a large increase in income to maintainsatisfaction.U1U2U366Chapter 1Risk Aversion andIndifference CurvesStandard Deviation of Income ExpectedIncomeSlightly Risk Averse:A large increase in standarddeviation

42、 requires only a small increase in incometo maintain satisfaction.U1U2U367Chapter 1Business Executivesand the Choice of RisknStudy of 464 executives found that:l20% were risk neutrall40% were risk takersl20% were risk adversel20% did not respondExample68Chapter 1nThose who liked risky situations did

43、 so when losses were involved.nWhen risks involved gains the same, executives opted for less risky situations.ExampleBusiness Executivesand the Choice of Risk69Chapter 1nThe executives made substantial efforts to reduce or eliminate risk by delaying decisions and collecting more information.ExampleB

44、usiness Executivesand the Choice of Risk70Chapter 1Reducing RisknThree ways consumers attempt to reduce risk are:1) Diversification2) Insurance3) Obtaining more information71Chapter 1Reducing RisknDiversification lSuppose a firm has a choice of selling air conditioners, heaters, or both.lThe probabi

45、lity of it being hot or cold is 0.5.lThe firm would probably be better off by diversification.72Chapter 1Income from Sales of AppliancesAir conditioner sales$30,000$12,000Heater sales12,00030,000 * 0.5 probability of hot or cold weatherHot Weather Cold Weather73Chapter 1Reducing RisknIf the firms se

46、lls only heaters or air conditioners their income will be either $12,000 or $30,000.nTheir expected income would be:l1/2($12,000) + 1/2($30,000) = $21,000Diversification74Chapter 1Reducing RisknIf the firm divides their time evenly between appliances their air conditioning and heating sales would be

47、 half their original values.Diversification75Chapter 1Reducing RisknIf it were hot, their expected income would be $15,000 from air conditioners and $6,000 from heaters, or $21,000.nIf it were cold, their expected income would be $6,000 from air conditioners and $15,000 from heaters, or $21,000. Div

48、ersification76Chapter 1Reducing RisknWith diversification, expected income is $21,000 with no risk. Diversification77Chapter 1Reducing RisknFirms can reduce risk by diversifying among a variety of activities that are not closely related.Diversification78Chapter 1Reducing RisknDiscussion QuestionslHo

49、w can diversification reduce the risk of investing in the stock market?lCan diversification eliminate the risk of investing in the stock market?The Stock Market79Chapter 1Reducing RisknRisk averse are willing to pay to avoid risk.nIf the cost of insurance equals the expected loss, risk averse people

50、 will buy enough insurance to recover fully from a potential financial loss.Insurance80Chapter 1The Decision to InsureNo$40,000$50,000$49,000$9,055Yes49,00049,00049,0000InsuranceBurglary No Burglary Expected Standard(Pr = .1)(Pr = .9) Wealth Deviation81Chapter 1Reducing RisknWhile the expected wealt