Making Decisions Under Model Misspecification and Star-Shaped Risk Measures - Maccheroni and Marinacci

Explore decision-making under uncertainty and risk measurement in this comprehensive lecture by Prof. Fabio Maccheroni and Prof. Massimo Marinacci. Delve into the concept of model misspecification and its impact on decision theory, examining how decision-makers confront uncertainty through structured models while acknowledging their limitations. Investigate the extension of max-min analysis to incorporate model ambiguity and simplification concerns. Learn about star-shaped risk measures, a class of monetary risk measures that includes both convex risk measures and Value-at-Risk, and understand their financial and decision-theoretical implications. Gain insights into the quantification of capital requirements for risk exposure in competitive delegation mechanisms and the emergence of star-shaped risk measures from variational preferences. This lecture, part of a workshop commemorating the centenary of Frank Knight's "Risk, Uncertainty, and Profit" and John Maynard Keynes' "A Treatise on Probability," offers a deep dive into the evolving understanding of risk and uncertainty in economics and probability theory.