UNCERTAIN DECISION MAKING AND ITS APPLICATION TO PORTFOLIO SELECTION PROBLEM

Abstract

In the traditional decision theory, choice with undetermined consequence is usually regarded as random variable, which usually describes objective uncertainty. This paper first considers the human uncertainty in making decisions, and employs uncertain variable to describe the choice. Utility function is also employed in the paper, and expected utility is introduced as a criterion to rank the choices. At last, in order to illustrate the uncertain decision making method, a portfolio selection problem is considered.