Simple models in finance: a mathematical analysis of the probabilistic recognition heuristic

IF 0.4 4区经济学 Q4 BUSINESS, FINANCE

Journal of Risk Model Validation Pub Date : 2017-06-02 DOI:10.21314/JRMV.2017.175

Martín Egozcue, Luis Fuentes García, K. Katsikopoulos, M. Smithson

引用次数: 1

Abstract

It is well known that laypersons and practitioners often resist using complex mathematical models such as those proposed by economics or finance, and instead use fast and frugal strategies to make decisions. We study one such strategy: the recognition heuristic. This states that people infer that an object they recognize has a higher value of a criterion of interest than an object they do not recognize. We extend previous studies by including a general model of the recognition heuristic that considers probabilistic recognition, and carry out a mathematical analysis. We derive general closed-form expressions for all the parameters of this general model and show the similarities and differences between our proposal and the original deterministic model. Corresponding author: M. Egozcue Print ISSN 1753-9579 jOnline ISSN 1753-9587 Copyright © 2017 Incisive Risk Information (IP) Limited

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金融学中的简单模型:概率识别启发式的数学分析

众所周知，外行和从业人员经常抵制使用复杂的数学模型，例如经济学或金融学提出的模型，而是使用快速和节俭的策略来做出决策。我们研究了一种这样的策略:识别启发式。这表明人们推断他们认识的物体比他们不认识的物体具有更高的兴趣标准价值。我们通过包含考虑概率识别的识别启发式的一般模型来扩展先前的研究，并进行数学分析。我们推导了该模型所有参数的一般封闭表达式，并指出了我们的建议与原确定性模型的异同。通讯作者:M. Egozcue Print ISSN 1753-9579 jOnline ISSN 1753-9587版权所有©2017锐锐风险信息(IP)有限公司

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来源期刊

Journal of Risk Model Validation BUSINESS, FINANCE-

CiteScore

1.20

自引率

28.60%

发文量

期刊介绍： As monetary institutions rely greatly on economic and financial models for a wide array of applications, model validation has become progressively inventive within the field of risk. The Journal of Risk Model Validation focuses on the implementation and validation of risk models, and aims to provide a greater understanding of key issues including the empirical evaluation of existing models, pitfalls in model validation and the development of new methods. We also publish papers on back-testing. Our main field of application is in credit risk modelling but we are happy to consider any issues of risk model validation for any financial asset class. The Journal of Risk Model Validation considers submissions in the form of research papers on topics including, but not limited to: Empirical model evaluation studies Backtesting studies Stress-testing studies New methods of model validation/backtesting/stress-testing Best practices in model development, deployment, production and maintenance Pitfalls in model validation techniques (all types of risk, forecasting, pricing and rating)