Difference between revisions of "Prospect Theory"
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Latest revision as of 15:27, 25 September 2021
Definition
Prospect Theory has been developed by Kahneman and collaborators as an alternative to Expected Utility Theory
In this framework a value function, similar to a utility function is used. How the value function for losses is significantly different from the value function of gains. One of the implications is that an individuals Financial Risk Tolerance will depend on how a situation is framed.
