New theory of value accretion under uncertainty

Abstract

This work consists in a non-canonical formulation a new theory of value accretion under uncertainty, exploring the concept of bernoullian emolumentum alongside idiosyncratic differences in the calculation of geometric expectations. This asymmetry allows for higher returns from uncertainty from both parties in a transaction. The present work reviews the evolution of expectations up to modern finance, before laying a conceptual framework for measuring mutual value accretion gaps, and finally, proposing an empirical work through tail-hedging of a market portfolio. All-in-all, this theory both holds in an a piori basis, as well as shows promise in practice for future developments and applications. Quantified in its iterations, modern financial theory shows methodological gaps, overruling the non-linearity, chaotic order of human action, as well as capital finitude and time dependence as axioms of real life. Indeed, here lies an unseen world of fully unexplored financial opportunities. Seen through a new light, from the metaphorical torch set by Daniel Bernoulli in 1738, who in his eminent Specimen Theoriae Novae de Mensura Sortis, proposed a solution to the famous St. Petersburg Paradox and set in motion a unified theory for assessing holistically the value of any investment.

Date of Award	26 Oct 2023
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	Ricardo Cunha (Supervisor)