Financial Decision Making: Risk
Not what you're looking for? Search our solutions OR ask your own Custom question.
Suppose your company's method of making decisions under risk is "making the best out of the worst possible outcome." What rule would you be forced to follow? Give an example and explain.
© BrainMass Inc. brainmass.com May 24, 2023, 11:58 pm ad1c9bdddfhttps://brainmass.com/business/business-policy-and-implementation/financial-decision-risk-541545
Solution Preview
This firm assumes that there is no probability distributions available or reliable enough for them so they use one of the methods that do not use probability in the decision:
• The Laplace Criterion: selection yielding the largest expected gain
• The Minimax criterion: most conservative criterion since it is based on making the best out of the worst ...
Solution Summary
The response defines Laplace , Minimax, Savage and Hurwicz and indicates which rule is followed and why. A reference is given.
$2.49