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Risk Modeling via Direct Utility Maximization Using Numerical Quadrature

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  • Kaylen, Michael S.
  • Preckel, Paul
  • Loehman, Edna

Abstract

An approach to risk modeling is developed which uses nonlinear programming and numerical integration to directly solve the expected utility maximization problem. The approach contrasts with earlier efforts in that, rather than using an empirical density function, a joint probability density function is explicitly specified. Comparisons are done showing that this approach yields more accurate solutions than the empirical density approach even when many points are sampled from the theoretical distribution.
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Suggested Citation

  • Kaylen, Michael S. & Preckel, Paul & Loehman, Edna, "undated". "Risk Modeling via Direct Utility Maximization Using Numerical Quadrature," Working Papers 256562, University of Missouri Columbia, Department of Agricultural Economics.
    • Handle: RePEc:ags:umcowp:256562
    DOI: 10.22004/ag.econ.256562
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    Cited by:

    1. Castejon, Mario & Moss, Charles B. & Ford, Stephen A., 1989. "Effect Of Debt Position On The Choice Of Marketing Strategies For Florida Orange Growers," 1989 Annual Meeting, July 30-August 2, Baton Rouge, Louisiana 270465, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    2. Nelson, Carl H. & Ndjeunga, Jupiter, 1997. "Elliptical Symmetry, Expected Utility, And Mean-Variance Analysis," ACE Reports 14795, University of Illinois at Urbana-Champaign, Department of Agricultural and Consumer Economics.
    3. Moss, Charles B. & Ford, Stephen A. & Castejon, Mario, 1991. "Effect of Debt Position on the Choice of Marketing Strategies for Florida Orange Growers: A Risk Efficiency Approach," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 23(2), pages 103-112, December.
    4. Seo, Sangtaek & Mitchell, Paul D. & Leatham, David J., 2005. "Effects of Federal Risk Management Programs on Optimal Acreage Allocation and Nitrogen Use in a Texas Cotton–Sorghum System," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 37(3), pages 685-699, December.
    5. Abrahams, Nii Adote & Shortle, James S., 1997. "Uncertainty And The Regulation Of Nitrate Pollution From Agriculture," 1997 Annual meeting, July 27-30, Toronto, Canada 21027, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).

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    Keywords

    Risk and Uncertainty;

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