thank you so much sir, my textbook was rubbish at explaining this concept, i think they're not very fond of annotating their diagrams in general which gives a nice layout to the book but a very unpleasant learning experience for the student. anyway, will defo check out more of your other videos!
@mikewdemarco9 жыл бұрын
Even when I'm not in your class anymore I'm using your lectures for RMI 600, thanks.
@RonaldMoy9 жыл бұрын
Good luck with the course.
@arsalanraza95882 жыл бұрын
Beautifully and simplistically explained. Thanks a ton
@offbeatdesi10 жыл бұрын
Amazing video Ronald!! I am giving CT8 ( Financial Economics ) exams , part of Actuarial Science . This video has cleared my doubt.. :)
@tommao64719 ай бұрын
Thanks a lot! I really struggled to understand risk theory, now it's much clearer. Great explanation :)
@asianflex78610 жыл бұрын
Thank you sir. Your are very clear and the use of your examples has really helped me grasp this concept
@arijitgupta33344 жыл бұрын
Simple and best explanation ever. Thank you very much
@everything_is_on_fire31556 жыл бұрын
Really helpful video man. It was simple, straight, and alot easier to understand. Thanks alot.
@michmichxo226 жыл бұрын
Thank you I have a midterm tommorow and it finally makes sense
@laurencearnfinsen7 жыл бұрын
Great lecture! Any chance you could elaborate on; "Expected loss"? Thanks again for the lecture!
@TS-zq6lf5 жыл бұрын
Thanks for clearing this topic up it’s been bugging me for ages
@jespermadsen4348 Жыл бұрын
Very well explained. Thank you, Ronald!
@luizamorim82656 жыл бұрын
This is some quality content, I logged in just to subscribe, thanks very much for your continuos contribution
@evangelineagustinolaer8134 ай бұрын
which one should be an ideal investor among the three different investors considering risk. Thank you for sharing your idea.
@akrammithun787 жыл бұрын
Just splendid..well articulated in the most comprehensive manner. i just did not understand an inch in my class.
@anamchowdhury68377 жыл бұрын
mama evabe na blleo parta........however amio may b akta thanks pai ;)
@nguyenny1854 Жыл бұрын
thank you sir, due to your explaining, i was Enlightened this theory, thank you so much
@trivietle975 жыл бұрын
you're the GOAT
@huai-jinzhang60995 жыл бұрын
nice tutorials, clear and easy to understand. ..love them.
@omarcuppini70723 ай бұрын
Very clear video, thank you
@evangelineolaer84 ай бұрын
Interesting subject. Which one is an ideal investor considering these 3 different investors with risk preferences? Thank you.
@RdasilvaG228 жыл бұрын
thanks for this video...well explained. kind of confused at the beginning :)
@preeyakotecha7 жыл бұрын
Hi there, could i ask you for some help on a question 1. (a) Explain why a monotone transformation of an expected utility function may not represent the same preferences over lotteries. [20%] (b) Jane is risk averse with Bernoulli utility function u=(x)^1/2. How does she rank the following two lotteries: L1=(4,9,0.5,0.5) and L2=(1,16,0.5,0.5)? You are told that Jane’s brother Jack is more risk averse than her. How would he rank the lotteries? Jane’s cousin June is risk neutral, how does she rank the two lotteries? Explain why your answer about Jack and Jane’s ranking does not require you to know the specific functional form of the Bernoulli function. [20%] Especially the second part of question b) I'm not too sure on how to answer. Thank you!!
@HasanIbra5 жыл бұрын
Explained very simple and clear
@petrhorak93110 жыл бұрын
Risk lovers = all U.S. action movie heroes. :D
@Fsheena10 жыл бұрын
Thanks! This helped me understand a topic in my micro module :)
@hassancohmdan98513 жыл бұрын
4:55 not rather but satisfied the same right? Since utility is the same for both.
@sarag.regassa7947 Жыл бұрын
Thank you so much! This was very helpful!
@jacqueshollands5630 Жыл бұрын
Excellent explanation
@shanbelwoldie1313 жыл бұрын
thank u my Dad It is good explanation
@tedros69174 жыл бұрын
THANK YOU THIS ACTUALLY MAKES SENSE
@davismotomiya292 жыл бұрын
Wealth u(W) = ROOT W, W=10, probability 0.3 to turn to 100, 0.7 to lose everything, wants to avoid risk, how much is he willing to pay? (0,1,2,3)
@Xez19195 жыл бұрын
You should have named it expected value of utility, not utility of expected value. E[U(x)] is not equal to U[E(x)], unless the decision maker is risk neutral.
@King1CurtisLOLZBros3 жыл бұрын
Ronald Moy MA MANNNNNNN
@serg3y3 жыл бұрын
Please put zero on the X and Y and move the X ticks to line up with dashed lines. Confusing otherwise.
@acnotinforever5618 жыл бұрын
200 likes from me!
@andrewnyumba6 жыл бұрын
this has been very helpful. thanx
@jeromedavidson3615 Жыл бұрын
Love you sooo much
@tanyen81776 жыл бұрын
Thank you sir! This is very useful to me
@keli50404 жыл бұрын
may i ask a question sir? are you also teach in Khan, i think i recognize your voice and it does real help me a lot!
@RonaldMoy4 жыл бұрын
No only here.
@sreeharsha757 жыл бұрын
Thanks for the video. Really good
@zacccy899 жыл бұрын
thank you so much, very clear!
@abdulrazzaq97265 жыл бұрын
Upload complete videos lecturers of Economics for postgraduate students.
@kavyanageshkandala598311 ай бұрын
Thanks alot sir !
@emmanuelacheampong27517 жыл бұрын
Great video! Keep it up
@LisaHoving9 жыл бұрын
This helped alot. Thanks!
@mrhargeable9 жыл бұрын
Thank you for this video!
@patricksiaulys99812 жыл бұрын
very helpful !!
@deepkushagra10 жыл бұрын
Hi everyone, why is the gambling line (red line) straight? Thanks a lot!
@RonaldMoy10 жыл бұрын
The expected value of the gamble is the red dashed line. Because it is below the curved line (the utility function), the individual gets lower utility from taking the gamble than he gets from the sure thing. For example, if you flip a coin, heads the person gets $100 and tails he gets nothing, if he's risk averse, he'd get greater utility if someone just gave him $50.
@deepkushagra10 жыл бұрын
thanks a lot ronald, please also tell if the red line could have also been a curved line below the blue line... wanted to know if it has to be straight. When we plot a chart between Expected Utility and Standard Deviation, its curve comes from E(U) = E (Return) + constant*(std dev)^2.. do we have a similar equation for this? thanks once again
@RonaldMoy10 жыл бұрын
kushagra deep The red line will be straight because you're' taking the expected return of two values. From my previous example of flipping a coin E(U) = .5 U(W=0) + .5 U(W=100), which is a linear function. The standard deviation isn't used to construct the red line.
@deepkushagra10 жыл бұрын
thanks a lot Ronald... appreciate your help...
@robertkrol45389 жыл бұрын
I'd also like to join Kushagra and thank you for that helpful video, although I'm afraid I still have some troubles trying to understand how the red line should be plotted. In the linear function, are probabilities the coefficients ? If the function E[U(coin flip] =is given by .5 U(W=0) + .5 U(W=100), it looks to me like it should be a constant function.
@Olav3D7 жыл бұрын
Thanks, I get it now :)
@remiecastro51982 жыл бұрын
Hello, can I ask if the utility function of a risk neutral investor is always linear? And does a risk neutral investor considers the level of satisfaction in making decision or they are just focused on the potential gains /expected returns? Thank you, I hope you can answer me 😊
@RonaldMoy2 жыл бұрын
Yes, it's a straight line because they only care about expected value. The level of satisfaction is determined by the expected return so they do care about satisfaction.
@remiecastro51982 жыл бұрын
@@RonaldMoy thank you for responding! I know it now, thanks!
@armansoltani9 жыл бұрын
really appreciate it!
@eduardocasanova73016 жыл бұрын
Someone knows who developed this theory? of Wealth utility/risk aversion
@MyMrwrestling10 жыл бұрын
top man respect u should teach in the uk
@davidlaport58417 жыл бұрын
Hey everyone, Would the risk averse (concave) risk neutral (linear) risk loving (convex) also respectively represent the increasing- constant- and decreasing- relative risk aversion. Can IRRA, CRRA and DRRA be represented in graphs. I can only find the marginal utility curves online but not these.
@ottoberger67062 жыл бұрын
where are this informations from? Could you link a source please? (paper, textbook...)
@RonaldMoy2 жыл бұрын
I believe I got it out of one of the CFA readings.
@JoshTizza110 жыл бұрын
Thanks so much mate!
@tkdesai134 жыл бұрын
Really helpful!!
@lenanovelli1235 жыл бұрын
Amazing, thanks!!
@user-ho2vp1rt5d3 жыл бұрын
Wrong interpretation of EV and EU on the graph for risk-averse, sir.
@hanhangao65417 жыл бұрын
still dont understand how the red dashed line come into being, why the utility function of gamble is a straightline? thanks
@RonaldMoy7 жыл бұрын
The blue line is the utility function so each point on it shows how much utility you have at each level of wealth. The red dashed line is just an average of the $50k and $150k, where the average is determined by the percentage you put in each asset. This turns out to be the equation for a straight line. If you start with 100% at $50k wealth and 0% at $150k wealth the average is $50k. For every 10% you move from $50k wealth to the $150k wealth, your wealth increases by $10k. Since the change is the same for every 10% change, you have a straight line.
@hanhangao65417 жыл бұрын
Thank you so much:) Really love your video!!!They help me a lot!
@nurulawang37929 жыл бұрын
thank you, this helps a lot :)
@julietajulia38636 жыл бұрын
Thank you!
@subhamoyroy50297 жыл бұрын
somewhere around 5.20 u said the person will have 90k with certainty than do gambling... and a 10k pay to assure himself to get 90k dollars .actually i couldnt get that part can u say it in brief ? Thank u
@RonaldMoy7 жыл бұрын
The red dashed line shows the expected value of the gamble (50% chance of $50k and 50% chance of $150k, which is $100k.) If we draw a line to the left from that point (red dashed line above $100k) to the utility curve (blue curve), where it intersects will show us the point where we have the same utility with certainty as we do in receiving $100k. In this case, it occurs where wealth equals $90k. This means we have the same satisfaction (utility) at $90k with certainty as we do with a gamble that has an expected value of $100k. In this case, you might be willing to pay up to $10k to receive $90k with certainty rather than $100k as a gamble.
@subhamoyroy50297 жыл бұрын
thank u so much sir for clearing my query...hope to ask more questions in future.
@hounamao71405 жыл бұрын
But so, how do you draw the straight line if probabilities are say: 0.2; 08 ?
@RonaldMoy5 жыл бұрын
The straight line would still be the same, the expected value would be different. Instead of an average of $100k it would be .2(50)+.8(150)=130k
@hounamao71405 жыл бұрын
@@RonaldMoymakes sense! thank you))
@carolinamena12797 жыл бұрын
thank you!
@gmmkeshav2 жыл бұрын
how did you made the graph
@RonaldMoy2 жыл бұрын
Just drew it in PowerPoint using the drawing tools.
@gmmkeshav2 жыл бұрын
@@RonaldMoy How are you getting the blue line? Which function it is representing(can you provide examples with mathematical equations)? And why utility from 50k to 100k is more than 100k to 150k?
@RonaldMoy2 жыл бұрын
@@gmmkeshav There's diminishing marginal utility of wealth so going from 50 to 100 gets you more utility than when you are richer and going from 100 to 150.
@jabbour10006 жыл бұрын
thnx
@leonardozuniga43045 жыл бұрын
Thanks
@Mariana-cd8zx Жыл бұрын
I love you
@ca.savanpatel86044 жыл бұрын
You are speaking wrong way. You should speak risk averse investor buy insurance for CU 10000 for getting insured for CU 100000