Module Handbook

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Module WIW-FE-CUC-M-7

Choice under Uncertainty (M, 4.5 LP)

Module Identification

Module Number Module Name CP (Effort)
WIW-FE-CUC-M-7 Choice under Uncertainty 4.5 CP (135 h)

Basedata

CP, Effort 4.5 CP = 135 h
Position of the semester 1 Sem. in WiSe
Level [7] Master (Advanced)
Language [EN] English
Module Manager
Lecturers
Area of study [WIW-FE] Macroeconomics
Reference course of study [WIW-88.21-SG#2009] M.Sc. Business Studies (2009) [2009]
Livecycle-State [NORM] Active

Courses

Type/SWS Course Number Title Choice in
Module-Part
Presence-Time /
Self-Study
SL SL is
required for exa.
PL CP Sem.
3V WIW-FE-CUC-K-7
Choice under Uncertainty
P 45 h 90 h - - PL1 4.5 WiSe
  • About [WIW-FE-CUC-K-7]: Title: "Choice under Uncertainty"; Presence-Time: 45 h; Self-Study: 90 h

Examination achievement PL1

  • Form of examination: oral examination (15-30 Min.)
  • Examination Frequency: each semester

Evaluation of grades

The grade of the module examination is also the module grade.


Contents

The aim of this module is to develop a theoretical understanding of choice behavior under uncertainty. Models on how agents make decisions in situations with uncertainty are discussed. We first discuss classical expected utility theory, then recent approaches to the choice behavior of decision makers.

Topics:

  • Preferences over lotteries
  • Expected Utility theory
  • Allais Paradox, Ellsberg Paradox, Machina Paradox
  • Risk Aversion
  • Risk Management
  • Consumption and savings
  • Elements of prospect theory

Competencies / intended learning achievements

  • Explain the concept of uncertainty
  • Compare payoff distributions
  • Measure the value of information
  • Understand static portfolio decisions and precautionary savings
  • Explain the preference reversal phenomenon
  • Discuss and evaluate empirical findings

Literature

Lecture Notes

Requirements for attendance of the module (informal)

None

Requirements for attendance of the module (formal)

None

References to Module / Module Number [WIW-FE-CUC-M-7]

Course of Study Section Choice/Obligation
[MAT-88.B84-SG] M.Sc. Actuarial and Financial Mathematics [Core Modules (non specialised)] Financial Economics [WP] Compulsory Elective
Module-Pool Name
[GS-CVT-BS-2022-E-MPOOL-6] Catalog Electives Business Studies and Economics 2022
[WIW-ET-MPOOL-7] Field of Specialization: Economic Theory
[WIW-FE-MPOOL-7] Field of Specialization: Financial Economics