Financial and Economic Aspects of St. Petersburg Paradox

Authors

  • Józsefné Libor Department for Methodology of Economic Analysis, Szolnok University College, H-5000 Szolnok, Tiszaligeti sétány, Hungary

DOI:

https://doi.org/10.26713/jims.v3i3.52

Keywords:

St. Petersburg paradox, Utility, Stock exchange, portfolio

Abstract

This paper reviews some aspects of the history and the economic application of the St. Petersburg paradox. In the early 1700s Nicolaus and Daniel Bernoulli formulated a problem in the theory of games of chance, now known as the St. Petersburg paradox. The mathematically correct infinity entrance fee for the game is not acceptable for a real person. Examining the paradox we can see, that there are many-many interesting, economic aspects of it. Some catastrophic financial situations could have been avoided using the analysis and application of the St. Petersburg paradox. In this work I show some generalizations and applications of the paradox mainly in the field of finance and economics. The studying of the paradox and the applications of it is very useful in the teaching of probability and statistics in any college of economics. If we see the scientific aspect, we can say that there are many possibilities, unresolved issues for the financial researchers, mathematicians in the field of St. Petersburg game.

Downloads

Download data is not yet available.

Downloads

CITATION

How to Cite

Libor, J. (2011). Financial and Economic Aspects of St. Petersburg Paradox. Journal of Informatics and Mathematical Sciences, 3(3), 211–220. https://doi.org/10.26713/jims.v3i3.52

Issue

Vol. 3 No. 3 (2011)

Section

Research Articles

License

Authors who publish with this journal agree to the following terms:
  • Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under a CCAL that allows others to share the work with an acknowledgement of the work's authorship and initial publication in this journal.
  • Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the journal's published version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgement of its initial publication in this journal.
  • Authors are permitted and encouraged to post their work online (e.g., in institutional repositories or on their website) prior to and during the submission process, as it can lead to productive exchanges, as well as earlier and greater citation of published work.