Teoria delle decisioni - ENG

DECISION THEORY

Prof. Ernesto Salinelli

Course Code: E0371
Subject code: SECS-S/06
6 ECTS – 48 hours
Location: Novara

Educational aims
The course aims at providing some useful introductory theoretical tools to develop the ability to analyze and formalize some typical problems of individual choice under certainty, uncertainty and risk. The exposition of many examples of economic-business and the use of spreadsheet aim to create an operational sensitivity with respect to the subject.

Content of the course
Introduction to decision-making problems. Preference and indifference relations and their properties.
Resource allocation decisions under certainty. Linear Programming: real-world problems modelling, variables, constraints, objective function, the feasible region, solutions. Solution methods: graphical analysis (two variables), algebraic method, iterative methods; implementation with Excel. Sensitivity analysis. Duality theory. Integer Programming (hint).
Introduction to the theory of financial decisions under risk. Elements of Probability. Ordering operator and its properties. Certainty equivalent: definition and examples. Maximization of the expected value (MVA) criterion, fair price, applications to the theory of insurance. Attitude towards risk. The risk premium. Compound lotteries. Axioms of rationality. Representation theorem of Von Neumann - Morgenstern. Principle of maximization of expected utility. Estimation of the utility function. Attitudes towards risk and the concavity of the utility function. Measure of risk aversion. Quadratic approximation of an utility function.
Mean-variance criterion. Random complex operations. FNVA and variance of the NPV of a financial operation. Applications to the insurance and portfolio selection.

Prerequisites
Differential calculus for real functions of one and several real variables. It is recommended to take the exams of Mathematics 1, 2 and Statistics.


Course Texts

•    Bellenzier L., Grassi R., Stefani S., Torriero A., Metodi quantitativi per il Management, Esculapio, 2012.
•    Castellani G., De Felice M., Moriconi F., Manuale di Finanza II (teoria del portafoglio e mercato azionario), Il Mulino, 2005.
•    Lecture notes by the teacher.

Further information can be found in the web page of the course at the URL:

https://eco.dir.unipmn.it


Teaching methods
Lectures, tutorials and laboratory.


Examination
A compulsory written exam with exercises and theoretic questions, and an optional oral exam. It is possible to arrange with the teacher alternative evaluation methods.