Publications

The publication list below consists of:

A. Articles in peer-reviewed scientific journals                    (11 pubs)
B. Contributions to books & monographs                            (4)
C. Articles in peer-reviewed conference proceeding            (24)
D. Working papers & other publications                              (6)
E. Selected presentations & unpublished work in progress  (6)
                                                                                                                                                                           

A. Articles in peer-reviewed scientific journals
 

Georgescu, I., Kinnunen, J., 2017, Optimal Prevention with Possibilistic Background Risk, International Journal of Management and Applied Science, ISSN: 2394-7926, Vol. 3, No. 4, April 2017, pp. 25-29. NEW

Possibility risk theory starts from the hypothesis that this is described by a fuzzy number and not by a random variable, as in the traditional probabilistic modeling. This paper is an attempt of possibilistic approach to risk management problem. In particular, the models proposed in this paper can be connected by the way the possibilistic risk influences the probability of a loss, the dimensions of the loss or both of them simultaneously considered (i.e. self-insurance, self-protection, or self-insurance-cum-protection). In the paper, there are studied two-period models of risk management in which the possibilistic risk may appear in the first period or in the second period. The main results of the paper establish necessary and sufficient conditions, or only sufficient, for the optimal management level effort to raise or to decrease as a result of adding such a possibilistic risk.

Georgescu, I., Kinnunen, J., 2016, Mixed Models for Risk Aversion, Optimal Saving, and Prudence, Fuzzy Economic Review, The International Association for Fuzzy-Set Management and Economy, Vol. 2, No. 2, Nov 2016. 

The models of this paper refer to mixed risk situations: one parameter is a fuzzy number, and the other is a random variable. Three notions of mixed expected utility are proposed as a mathematical basis of these models. The results of the paper describe risk aversion and prudence of an agent in front of a risk situation with mixed parameters, and the changes of optimal saving as an effect of mixed risk.

Georgescu, I., Kinnunen, J., 2016, Credibilistic Risk Aversion and Prudence, International Journal of Business Innovation and Research, Inderscience Publishers, Vol. 11, No. 1, pp. 146-160.

Risk aversion and prudence are well-studied topics in probabilistic risk theory. This paper uses credibility theory of B. Liu and Y. Liu to approach these closely related concepts. The risk situations are modeled by fuzzy variables and the indicators of risk aversion and prudence are defined in the context of credibilistic expected utility theory. Calculation formulas for these indicators are established and their properties are examined. The paper establishes relationships between credibilistic risk aversion and prudence, as well as, between credibilistic prudence and optimal precautionary saving.

Georgescu, I., Kinnunen, J., 2015, Distances of Fuzzy Choice Functions, Journal of New Mathematics and Natural Computation, World Scientific Vol. 11, No. 3, 249 (2015).  DOI: 10.1142/S1793005715500088 

In this paper we introduce four distances on the set of fuzzy choice functions defined on a finite choice space. They are studied along with four distances on the set of alternatives. The two types of distance allow to investigate the way the changes in fuzzy preferences are reflected in the changes of fuzzy choice associated with them. Also the way the changes in fuzzy choices manifest themselves in changes in fuzzy preferences are studied. The coefficient of normality of a fuzzy choice function is defined as a measure of normality and its variation is evaluated with respect to the variation of fuzzy choices. Finally, the variation of some congruence indicators is evaluated as effect of the changes in fuzzy choices.

Georgescu, I., Kinnunen, J., 2013, A Risk Approach by Credibility Theory, Fuzzy Information and Engineering, Springer, Vol. 5, No. 4, pp. 399-416. DOI 10.1007/s12543-013-0154-0 


This paper attempts to treat some topics of risk theory by means of credibility theory. We study the risk aversion of an agent faced with a situation of uncertainty represented by a discrete fuzzy variable, the relationship between stochastic dominance and credibilistic dominance, and an index of riskiness of discrete credibilistic gambles. In the framework of an optimal saving credibilistic model, the way the presence of risk modifies the level of optimal saving is studied. The main tool of our investigation is an operator defined by B. Liu and Y. K. Liu by which to a discrete fuzzy variable one associates a discrete random variable with the same expected value as the former.

Georgescu, I., Kinnunen, J., 2013, A New Notion of Possibilistic Covariance, Journal of New Mathematics and Natural Computation, World Scientific, Vol. 9, No.1, pp. 1-11. (On a top 10 most read articles of the journal as of January 2015)

Possibilistic indicators of fuzzy numbers (expected value, variance, and covariance) are an efficient instrument in the modeling of uncertainty phenomena. Various models of uncertainty phenomena have led to several notions of variance and covariance. In particular, the possibilistic models of risk aversion previously studied by one of the authors imposed a notion of variance of a fuzzy number di.erent from those existing in the literature. In this paper a new notion of covariance of two fuzzy numbers corresponding to the possibilistic variance mentioned is studied. This possibilistic covariance can be used, e.g., in models of possibilistic risk aversion with many parameters.

Georgescu, I., Kinnunen, J., 2012, A Mixed Portfolio Selection Problem, Advances in Intelligent and Soft Computing, 2012, Springer, Vol. 151, pp. 95-102.


The mixed portfolio selection problem studied in this paper corresponds to a financial situation in which some return rates are mathematically described by random variables and others are described by fuzzy numbers. Both Markowitz probabilistic model and a possibilistic portfolio selection model are generalized. A calculation formula for the optimal solution of the portfolio problem and a formula which gives the minimum value of the associated risk are proved.

Collan, M., Kinnunen, J., 2011,  A Procedure for the Rapid Pre-acquisition Screening of Target Companies Using the Pay-off Method for Real Option Valuation, Journal of Real Options and Strategy, Vol. 4, No. 1, pp. 117-141.

Pre-acquisition target screening is a task that often needs to be made fast, but is still complex, especially due to the need to estimate the value of possible synergies arising from an acquisition. Acquisition synergies are highly uncertain, difficult to explicitly quantify, and require successful management actions to be realized. The valuation of synergies calls for methods that can handle both, high uncertainty and inexact information. This paper discusses how a rapid pre-acquisition screening of target companies can be performed with the pay-off method for real option valuation, treating the acquisition synergy as a real option available for the acquirer. The pay-off method is a simple, intuitive, and practitioner friendly method. We define acquisition synergy as the value arising from resource redeployments within the newly formed entity of the target and the acquirer, and as the value gained through the possible divesture of target company assets. The procedure presented can be used in the screening of prospective acquisition target companies.


Georgescu, I., Kinnunen, J., 2011, Multidimensional Possibilistic Risk Aversion, The International Journal of Mathematical and Computer Modelling, Elsevier, Vol. 54, No. 1-2, pp. 689–696.

This paper deals with the analysis of risk aversion of an agent faced with a situation of uncertainty with several risk parameters. These risk parameters are represented by fuzzy numbers and the attitude of the agent to the risk situation by a multidimensional utility function. Risk aversion is measured by the notion of generalized possibilistic risk premium. The main result of the paper is an approximate calculation formula of generalized possibilistic risk premium in terms of the utility function and of possibilistic indicators (mean value and covariance).

Georgescu, I., Kinnunen, J., 2011, Credibility measures in portfolio analysis: From possibilistic to probabilistic models Journal of Applied Operational Research, Tadbir Institute for Operational Research, Systems Design and Financial Services, Vol. 3, No. 2, pp. 91-102.

This paper treats risk based on the notions of credibility measure and credibility expected value. Firstly, the paper derives and discusses the credibility expected value. Secondly, the paper presents a new method of analysis of possibilistic portfolios. The new step is a construction by which with a possibilistic portfolio one associates a probabilistic portfolio. The problem solving of possibilistic portfolio gets down to the problem solving of associated probabilistic portfolio. For the latter one a variety of solving methods exist, from which we can choose the most appropriate one for the initial problem. Risk evaluation in the context of probabilistic portfolio leads to an understanding of risk for the possibilistic portfolio. The paper presents an illustrative case of a venture capitalist firm, which needs to solve the shares of its budget to be invested to start-up companies.

Collan, M., Kinnunen, J., 2009, Acquisition Strategy and Real Options, The IUP Journal of Business Strategy, Vol. VI (3&4), September-December, pp. 45-65. Link to Working paper PDF

This paper presents strategic level real options that acquiring companies have in the corporate acquisitions process. The real options presented are different from those residing within the acquisition candidate companies as stand-alones. The paper further presents acquisition synergies as real options and as sequential real options to acquisition timing, and the rather special case of acquiring businesses with divestible non-core assets. Models for the valuation of the aforementioned real options are discussed with special focus on input variable values. The paper illustrates the non-core business acquisition issue with a case of acquisition and partial divestment of Partek by Kone.          

B. Contributions to books & monographs

Georgescu, I., Kinnunen, J., Casademunt, A.M.L., 2015, Possibilistic Models of Risk Management, in Kahraman and S. Çevik Onar (eds.), Intelligent Techniques in Engineering Management, Intelligent Systems Reference Library 87, pp. 21-44, DOI: 10.1007/978-3-319-17906-3_2, Springer

In the traditional treatment, risk situations are modeled by random variables. This paper focuses on risk situations described by fuzzy numbers. The first goal of the chapter is to define and characterize possibilistic risk aversion and study some of its indicators. The second goal is the study of two possibilistic models of risk management: a coinsurance problem and an investment portfolio problem.

Georgescu, I., Kinnunen, J., 2012, Mixed Multidimensional Risk Aversion, in R.-E. Precup, S. Kovacs, S. Preitl and E. M. Petriu (Eds.), Applied Computational Intelligence in Engineering and Information Technology - Topics in Intelligent Engineering and Informatics, 2012, Vol. 1, pp. 39-50, DOI: 10.1007/978-3-642-28305-5_3, Springer.

The topic treated in this chapter is the risk aversion of an agent in front of a situation of uncertainty with many risk parameters. We will study a general model of risk aversion in which some parameters are probabilistically described (by random variables) and others are possibilistically described (by fuzzy numbers). For the construction of this model, firstly, mixed expected utility, a notion, which unifies probabilistic and possibilistic aspects of expected utility theory is introduced. The notion of mixed risk premium vector is introduced as a measure of risk aversion with mixed parameters. The main result of the chapter is an approximate calculation formula for mixed risk premium vector. Lastly, our model is applied in the evaluation of risk aversion in grid computing.

AssessGrid, 2008, Advanced Risk Assessment, EU-Project AssessGrid Deliverable, September, 2008. (Co-author and co-editor).


The deliverable describes the risk assessment approach and models developed in the EU-funded project, AssessGrid, aiming at developing software and possible standards to assess risks in grid computing. The deliverable presents the risk assessment from the view of the provider of grid computing services. The focus of the assessment is on the evaluation of business risk, the risks of violating service level agreements, SLAs.  The deliverable presents state-of-the-art review of risk assessment in grid environment, presents a statistical (Bayesian) approach and approximate approaches (a hybrid model to include probabilistic and possibilistic elements, fuzzy Bayesian, and a linguistic approach) to be applied in dynamic and predictive risk assessment.


Kinnunen, J., 2002,
Industry Foresight [with Software Agents: an Energy Case], Masters Thesis in economics, University of Vaasa.

C. Articles in
peer-reviewed conference proceedings

Georgescu, I., Androniceanu, A., Kinnunen, J., 2018, A Computational Analysis of Economic Freedom Indicators and GDP in EU States, Accepted to the 17th International Conference on Informatics in Economy, May 17-202008, Lasi, Romania. NEW

This paper studies the relationship between 12 freedom indicators and GDP per capita of the 28 European Union countries as of 2016. OECD’s GDP data for the EU countries is analysed together with the freedom indicators behind the Index of Economic Freedom. The data is studied using hierarchical clustering method and principal component analysis. The interpretations of the obtained clusters and the main findings are presented and graphically analyzed.

Kinnunen, J., Georgescu, I., Tamminen, L., 2017, Do economic freedoms create national wealth? Clustering and principal component analyses of freedom variables and GDP, Proceedings of The Real Options Workshop, October 3-October 4, 2017, Lappeenranta, Finland. NEW

This paper studies the relationship of economic freedom variables, GDP per capita, and GDP growth. The OECD’s data for GDP of 36 countries are firstly matched with 10 freedom variables behind the Index of Economic Freedom. The normalized data is then clustered by self-organizing maps to get four clusters of countries. The constructed clusters are intuitively explainable, but principal component analysis is used to support the interpretation of each cluster. The paper discusses a real options perspective, how economic freedoms can open up wealth-creating options and increase GDP growth, and in which circumstances this may not be the case. The purpose of the study is to lay a ground for later exploration of links from economic freedoms to material and non-material well-being of which at least the first one clearly is affected by GDP.

Kinnunen, J., Georgescu, I., 2017, VC-Portfolio Selection under Different Risk Models, Accepted to the 21st Annual International Conference on Real Options, June 31- July 1, 2017, Boston, MA, USA

This paper views a venture capitalist's (VC's) portfolio selection problem under three types of uncertainties corresponding to probabilistic, possibilistic, and credibilistic risks. A VC faces such a complex situation, when several potential target companies are under analysis and some are handled in probabilistic terms while others call for a possibilistic or a credibilistic treatment. A possibilistic instead of probabilistic treatment is suitable for cases, where uncertainty is very high. This can be due to lack of available statistical information, because investment targets are often privately owned small companies with limited public information, possibly totally without past sales, without market values, there don't exist comparable firms to allow comparables-based valuations, and their value largely depends on intangibles and their strategic future actions. Credibilistic approach also has similar benefits over a probabilistic approach and certain computation benefits over a possibilistic approach. This paper unifies probabilistic, possibilistic ,and credibilistic portfolio selection models resulting in the optimal solution of the 3-component portfolio problem faced by a VC. The paper discusses the added value and the usefulness of the the approach in VC framework and presents simulation analysis and a calculation example to demonstrate the practicality of the approach.

Georgescu, I., Kinnunen, J., 2017, Optimal Prevention with Possibilistic Background Risk, Proceedings of The IRES International Conference on Science, Technology and Management, February 13-14, 2017, Marrakech, Morocco. ISBN: 978-93-86083-34-0. 

Possibility risk theory starts from the hypothesis that this is described by a fuzzy number and not by a random variable, as in the traditional probabilistic modeling. This paper is an attempt of possibilistic approach to risk management problem. In particular, the models proposed in this paper can be connected by the way the possibilistic risk influences the probability of a loss, the dimensions of the loss or both of them simultaneously considered (i.e. self-insurance, self-protection, or self-insurance-cum-protection). In the paper, there are studied two-period models of risk management in which the possibilistic risk may appear in the first period or in the second period. The main results of the paper establish necessary and sufficient conditions, or only sufficient, for the optimal management level effort to raise or to decrease as a result of adding such a possibilistic risk.

Georgescu, I., Kinnunen, J., 2016, Mixed Models for Risk Aversion, Proceedings of the North-European Society for Adaptive and Intelligent Systems' NSAIS'16 Workshop on Adaptive and Intelligent Systems, August 16-19, 2016, Lappeenranta, Finland.

The models of this paper refer to mixed risk situations: one parameter is a fuzzy number, and the other is a random variable. Three notions of mixed expected utility are proposed as a mathematical basis of these models. The results of the paper describe risk aversion and prudence of an agent in front of a risk situation with mixed parameters, and the changes of optimal saving as an effect of mixed risk.  

Kinnunen, J., 2016, Economic Freedom Measures and Global Wealth Distribution. Proceedings of the 10th RSSIA Summer Seminar on New Institutional Analysis, July 2-6, 2016, Moscow, Russia.


Global inequality is inherently a hot topic of economic and political debates. Attitudes towards wealth and income inequalities depend radically on the point of view: some think that some intervention by a state or supra-national actors is required; others think that regulation and lack of free trade have caused the inequalities, while the inequalities are rather seen as incentives. This study focuses on the relationship between global wealth inequalities and economic freedom variables using clustering analysis. The starting point is Credit Suisse’s global wealth data and the ten variables behind the Wall Street Journal’s and Heritage Foundation’s Index of Economic Freedom: property rights, freedom from corruption, fiscal freedom, government spending, business freedom, labor freedom, monetary freedom, trade freedom, investment freedom, and financial freedom. The freedom as well as the wealth data are averaged over three years 2013-2015 to get better generalizability. Firstly, the economic freedom indicators, which go hand in hand with the country-specific wealth measures, are identified. Secondly, the relationship of the economic freedom and wealth distribution is under study.

Georgescu, I., Kinnunen, J., 2016, New Mixed Models of Optimal Saving, Proceedings of the 11th IEEE International Symposium on Applied Computational Intelligence and Informatics, May 12-14, 2016, Timisoara, Romania, pp. 407-412. ISBN: 978-1-5090-2379-0

This paper studies mixed models of saving with three types of risks: labor income risk, interest rate risk, and background risk. Each risk can be probabilistically modeled by a random variable or possibilistically modeled by a fuzzy number. For each model a notion of precautionary saving is defined in order to measure the effect that various types of risk have on optimal saving. The main results establish necessary and sufficient conditions on consumer’s prudence when risk parameters are introduced.

Georgescu, I., Kinnunen, J., 2015,  Precautionary Saving with Possibilistic Background Risk, Proceedings of 16th IEEE International Symposium on Computational Intelligence and Informatics, Budapest, Hungary, November 19-20, 2015.

This paper studies a mixed model of saving with three risks: labor income and interest rate risks are random variables and background risk is a fuzzy number. Two notions of precautionary saving are introduced, measuring the effect of these types of risk on optimal saving and necessary and sufficient conditions on their non–negativity are proved. This leads to two concepts of consumer’s prudence when new risk parameters are introduced. The main results of the paper characterize the two concepts of prudence by conditions of partial derivatives of consumer’s utility function.

Kinnunen, J., 
Georgescu, I., 2015, 
Global Inequality, Economic Freedoms, and Real Options Thinking, presented in the 19th Annual International Conference on Real Options, Athens, Greece, June 27-20, 2015.

Global inequality has surged recently as a political and economic issue of which Piketty phenomenon has been just one example. Income or wealth inequality is seen by some to require intervention from government and transnational bodies, whereas others see government intervention and lack of free trade as the reason for inequality, while finding some inequality good for incentive purposes. This paper studies the relationship of economic freedoms, flexibility, and wealth inequality. We start from Credit Suisses wealth data published yearly in Global Wealth Report. We extend the typical approach focusing on net wealth distributions, firstly, by presenting similar calculations using the value of total assets, which includes both owner's equity and borrowed capital and, secondly, consider the real options view on the levered agents total assets and argue for the benefits of using total asset value instead of net wealth value and we suggest to use real-options-based total value distributions for more meaningful interpretation of inequality, global or national. In this approach, debt is not seen as a negative cost, because it rather reflects opportunities offered by robust financial markets and access to credit. Finally, we use clustering analysis to study how the inequality of total assets is related to ten variables behind the Heritage Index of Economic Freedom: property rights, freedom from corruption, fiscal freedom, government spending, business freedom, labor freedom, monetary freedom, trade freedom, investment freedom, and financial freedom. This leads to new insights into global inequality and economic opportunity and opens up several interesting new research questions.

Kinnunen, J., Georgescu, I., 2014,  Clustering Analysis of Real Option Value and Financial Ratios Using Self-Organizing Map, Accepted to the 18th Annual International Conference on Real Options, Medellin, Colombia, July 23-26, 2045.

This paper studies ex-post financial ratios and real option values of Finnish exchange listed companies’ publicly available yearly financial data, i.e., financial statements and market valuations, using self-organizing map, SOM, an unsupervised neural network based tool for clustering, analysis and visualization of multidimensional data. In the unsupervised learning the training set contains only the selected input values and the SOM is to learn the data structure. We have selected the financial inputs in such a way that they include the key drivers of companies’ market values above their fundamental book values to get a proxy for their real options values. We interpret the visualized clustering results and argue that the method is applicable and valuable, in addition to general descriptive purposes, for private investors’, venture capitalists’ and corporate acquirers’ portfolio selection in their quest for upside potential. This opens up interesting future research opportunities from real options perspective laid out in this study.

Georgescu, I., Kinnunen, J., 2013, A Credibilistic Approach to Risk Aversion and PrudenceProceedings of the Finnish Operations Research Society 40th Anniversary Workshop (FORS40) on Optimization and Decision-Making, Lappeenranta, Finland, August 20-21, 2013, pp. 72-77.

Risk aversion and prudence are deeply studied topics in probabilistic risk theory. In this paper an approach of the two topics by credibility theory of B. Liu and Y. Liu is attempted. The risk situations are modeled by fuzzy variables and the indicators of risk aversion and prudence are defined in the context of credibilistic expected utility theory. Properties of these indicators are studied and approximate calculation formulas are established.

Kinnunen, J., 
Georgescu, I., 2013,  M&A Target Portfolio Selection: A Real Options Approach, Proceedings (CD-ROM) of the 17th Annual International Conference on Real Options, Tokyo, Japan, July 24-27, 2013.

In this paper we present a two-component portfolio selection problem under two types of uncertainties, i.e., probabilistic risk and possibilistic risk. We study the portfolio selection problem in mergers and acquisitions, M&As, and show the usability of the presented mixed model in portfolio selection of corporate acquisition targets. We view the total M&A value consisting of a stand-alone target value plus a synergistic strategic (real options) value. We illustrate, through a numerical example, how the portfolio model can be applied to M&As from an acquirer’s perspective, in the case, where some targets are valued probabilistically using Datar-Mathews real options approach to value the strategic part and other targets possibilistically using a fuzzy real options approach to value the strategic part. The portfolio problem corresponds to a situation in which some return rates on M&A investments are described by random variables, while others by fuzzy numbers. We discuss the setup of an acquirer facing a situation in which some acquisition targets are reasonable to be valued probabilistically and others possibilistically. Markowitz probabilistic model and a possibilistic portfolio selection model are unified resulting in the optimal solution of the mixed portfolio problem with the minimum of the unified portfolio risk.

Georgescu, I., Kinnunen, J., 2012, A Probabilistic Approach to Possibilistic Risk Aversion, Proceedings of the 7th IEEE International Conference on Computer Sciences and Convergence Information Technology (ICCIT 2012), Seoul, Korea, December 3-5, 2012, pp. 342-345.

This paper proposes an approach to possibilistic risk aversion by means of probabilistic concepts. A notion of probabilistic risk premium is defined as the probabilistic risk premia associated with the uniform distributions on the level sets of a fuzzy number. We prove an approximate computation formula for this indicator and a Pratt-type theorem to compare two agents's possibilistic risk aversions.

Georgescu, I., Kinnunen, J., 2012, Possibilistic Risk Aversion and Its Indicators, Proceedings of the 11th WSEAS International Conference on Applied Computer and Applied Computational Science (ACASOS 2012), Rovaniemi, Finland, April 18-20, 2012, Recent Researches in Applied Computers & Computational Science, pp. 178-183.

In the traditional treatment, risk situations are modeled by random variables. This paper focuses on risk situations described by fuzzy numbers. The goal of the paper is to define and characterize possibilistic risk aversion and study some of its indicators.

Georgescu, I., Kinnunen, J., 2012, A Generalized 3-Component Portfolio Selection Model, Proceedings of the 11th WSEAS International Conference on Artificial Intelligence, Knowledge Engineering and Data Bases (AIKED 2012), Cambridge, UK, February 22-24, 2012, Recent Researches in Artificial Intelligence and Database Management, pp. 142-147.

In this paper we study a portfolio selection problem corresponding to a financial situation characterized by three components: some returns are mathematically described by random variables, others by fuzzy numbers, and a third group of returns by discrete fuzzy variables. The proposed model unifies probabilistiv, possibilistic, and credibilistic aspects of portfolio selection. Both Markowitz probabilistic model and a possibilistic portfolio selection model are generalized. A calculation formula for the optimal solution of the portfolio problem and a formula, which gives the minimum value of the associated risk are proved.

Georgescu, I., Kinnunen, J., 2012, A Mixed Portfolio Selection Problem, Proceedings of to the International IEEE Symposium on Distributed Computing and Artificial Intelligence (DCAI 2012), Salamanca, Spain, March 28-30, 2012. Advances in Intelligent and Soft Computing, 2012, Vol. 151, Distributed Computing and Artificial Intelligence, pp. 95-102, Springer.

The mixed portfolio selection problem studied in this paper corresponds to a financial situation in which some return rates are mathematically described by random variables and others are described by fuzzy numbers. Both Markowitz probabilistic model and a possibilistic portfolio selection model are generalized. A calculation formula for the optimal solution of the portfolio problem and a formula which gives the minimum value of the associated risk are proved.

Georgescu, I., Kinnunen, J., 2011, Credibilistic Index of Riskiness, Proceedings of the 12th IEEE International Symposium on Computational Intelligence and Informatics (CINTI 2011), Budapest, Hungary, November 21-22, 2011.

This paper treats risk theory by means of credibility theory. The focus is on risk situations represented by discrete fuzzy variables. They can be useful to an agent in the decision-making process of credibilistic risk problems. An index of riskiness of Aumann-Serrano type for discrete credibilistic gambles is defined and the proofs are provided.

Georgescu, I., Kinnunen, J., 2011, Modeling the Risk by Credibility TheoryProceedings of the 3rd International IEEE Conference on Advanced Management Science (ICAMS 2011), Kuala Lumpur, Malaysia, November 4-6, 2011, International Proceedings of Economics Development and Research, Vol. 19, pp. 15-19.


This paper is an attempt to treat some topics of risk theory by means of credibility theory. The risk aversion of an agent faced with a situation of uncertainty represented by a discrete fuzzy variable and the relationship between stochastic dominance and credibilistic dominance are under study.

Georgescu, I., Kinnunen, J., 2011,
Possibilistic Risk Aversion with Many Parameters, Proceedings of the International Conference on Computational  Science (ICCS'11), Singapore, June 1-3, 2011; Procedia Computer Science, Elsevier, Vol. 4, pp. 1735-1744.

In this paper a possibilistic model of risk aversion with several parameters is proposed. The notion of possibilistic risk premium vector is introduced as a measure of an agent’s risk aversion to a situation with several risk parameters. The main result of the paper is an approximate calculation formula of this indicator. The way we can apply this model in risk aversion evaluation in grid computing is sketched out.

Georgescu, I., Kinnunen, J., 2011,  Multidimensional Risk Aversion with Mixed Parameters, Proceedings of the 6th IEEE International Symposium on Applied Computational Intelligence and Informatics (SACI 2011), Timisora, Romania, May 19-21, 2011.


In this paper we propose an approach of risk aversion for the situations with many risk parameters. Some of the parameters are described probabilistically, and others possibilistically. We introduce mixed risk premium vector, a notion which combines probabilistic and possibilistic aspects of risk aversion. The main result of the paper is a formula for the calculation of the mixed risk premium vector. Our model can be applied for the evaluation of risk aversion in grid computing.


Georgescu, I., Kinnunen, J., 2010, Multidimensional Possibilistic Risk Aversion, Proceedings of  the 11th International Symposium on Computational Intelligence and Informatics (CINTI'10), Budapest, Hungary, November 18-20, ISBN 978-1-4244-9278-7, IEEE Catalog Number CFP1024M-PRT, pp. 163-168.


In this paper the notion of generalized possibilistic risk premium is introduced as a measure of the risk aversion of an agent faced with several components of possibilistic risk. The main result of the paper is a formula for the calculation of the generalized possibilistic risk premium expressed in terms of a utility function and of some possibilistic indicators.

Georgescu, I., Kinnunen, J., 2010, Credibility Measures in Portfolio Analysis, Proceedings of the  2nd International Conference on Applied Operational Research (ICAOR'10), Turku, Finland, August 25-27, Lecture Notes in Management Science, Vol. 2,  pp. 6-18.

This paper treats risk based on the notions of credibility measure and credibility expected value. Firstly, the paper derives and discusses the credibility expected value. Secondly, the paper presents the definition and analysis of possibilistic portfolios. With a possibilistic portfolio a probabilistic portfolio is canonically associated. Risk evaluation in the context of probabilistic portfolio leads to an understanding of risk for the possibilistic portfolio.

Kinnunen, J., 2010,  Valuing M&A Synergies as (Fuzzy) Real Options, Proceedings (CD-ROM) of the 14th Annual  International Conference on Real Options, Rome, Italy, June 16-19. 

This paper views operating synergies as real options that acquiring companies have in the post-acquisition M&A process. The paper builds on the synergistic restructuring theory stating that both acquisitions and divestitures are wealth creating activities and takes a holistic view on acquisition synergies, which arise both from resource redeployments between the acquirer and the acquisition target company and the executed divestitures of target’s assets within the post-acquisition process.  We present a procedure to ex-ante calculate a first approximation for the value of the synergies in the screening stage of the M&A process. We argue that synergies are highly uncertain and require significant management actions and, for that reason, an appropriate method for the valuation is the fuzzy pay-off method, which is presented as an integrated part of a decision support system built for the screening of potential acquisition targets. The paper also discusses the ordering of acquisition candidates according to their total value based on the presented fuzzy measure.

Georgescu, I., Kinnunen, J., 2010, A New Notion of Possibilistic Covariance, Proceedings of the 6th International Conference on Economic Cybernetic Analysis: Global Crisis Effects and the Patterns of Economic Recovery (GCER 2011) Bucharest, Romania, May 20-21, pp. 159-167.

In this paper a new covariance of fuzzy numbers is studied. It corresponds to a notion of possibilistic variance used previously by the authors for the evaluation of possibilistic risk premium.

Kinnunen, J., Collan, M., 2009, Supporting the Screening of Corporate Acquisition Targets, Proceedings of the 42nd International Conference on System Sciences (HICSS'09), Waikoloa, Hawaii, January 5-8.


The paper discusses the screening of potential corporate acquisition targets from the acquiring company perspective. A structured process to screen acquisition targets using both, financial and non-financial data and a developed prototype DSS to support the screening process are presented.  


Collan, M., Kinnunen, J., 2008, Strategic Level Real Options in Corporate Acquisitions, Proceedings of the 1st International Conference on Applied Operational Research (ICAOR'08), Yerevan, Armenia, September 15-17.


In the paper we present strategic level real options that acquiring companies have in the corporate acquisitions process. The real options presented are such that exist on the strategic level and are different from the real options that reside within the acquisition candidate companies as stand-alone. We present acquisition synergies as real options and strategy level real options created in the acquisition as sequential real options to acquisition timing. Evaluation of target companies that includes the aforementioned real options is discussed.


D. Working papers & other publications

Georgescu, I., Kinnunen, J., 2011, Modeling the Risk by Credibility Theory, IAMSR Research Report 6/2011.


This paper is an attempt to treat some topics of risk theory by means of credibility theory. The risk aversion of an agent faced with a situation of uncertainty represented by a discrete fuzzy variable, the relationship between stochastic dominance and credibilistic dominance and an index of riskiness of discrete credibilistic gambles is under study.

Georgescu, I., Kinnunen, J., 2011,  Multidimensional Risk Aversion with Mixed Parameters, IAMSR Research Report 3/2011.


In this paper we propose an approach of risk aversion for the situations with many risk parameters. Some of the parameters are described probabilistically, and others possibilistically. We introduce mixed risk premium vector, a notion which combines probabilistic and possibilistic aspects of risk aversion. The main result of the paper is a formula for the calculation of the mixed risk premium vector. Our model can be applied for the evaluation of risk aversion in grid computing.


Georgescu, I., Kinnunen, J., 2010, Multidimensional Possibilistic Risk Aversion, IAMSR Research Report 3/2010.


In this paper the notion of generalized possibilistic risk premium is introduced as a measure of the risk aversion of an agent faced with several components of possibilistic risk. The main result of the paper is a formula for the calculation of the generalized possibilistic risk premium expressed in terms of a utility function and of some possibilistic indicators.

Georgescu, I., Kinnunen, J., 2008,  Credibility Measures: a Basis for Risk Theory, Turku Centre of Computer Science Technical Report 6/2008.


The paper is an attempt to treat two themes of risk theory based on the notions of credibility measure and credibility expected value. The first theme refers to the definition and analysis of possibilistic portfolios. With a possibilistic portfolio a probabilistic portfolio is canonically associated. Risk evaluation in the context of probabilistic portfolio leads to an understanding of risk for the possibilistic portfolio. The second theme deals with risk aversion in an uncertain situation described by a discrete possibilistic distribution. Using the credibility expected value we define a notion of risk premium and we prove a formula for its evaluation.

Heikkilä, M., Kinnunen, J., 2008, Business Risk and Risk Management in Grid Computing. In Carlsson and Störling-Sarkkila, Institute for Advanced Management Systems Research Annual Report 2006, IAMSR Research Report 1/2008.


The study discusses the risk management in Grid computing, where the focus is on the identification of business risks, attaching them to the relevant context, evaluation of the possibility of the risks, and acting on them. The paper presents some early results from the EU-funded research project, AssessGrid.

Kinnunen, J., 2004, Price-Earnings Ratio – An Indicator of Future Earnings or a Red Flag of Overvaluation?, Bank of Finland, Financial Markets Department Working Paper 4/2004. The results are discussed in Bank of Finland Financial Market Report 1/2005, pp. 16-17.

The paper discusses the role of Price-Earnings ratio in the market valuation of corporate stocks. The literature of the valuation is extensively reviewed and the historical dynamics and the key driving forces of the P/E-ratio in Finland is under study. The persistence of earnings is rejected and the mean reversion property of the P/E-ratio is observed, which is in line with the international evidence. The paper suggests that the market valuation levels depend on the investors believing that earnings are persistent, i.e., it is believed that the historical earnings are a significant indication of future earnings, which is not supported by observations.


E. Selected presentations & unpublished work in progress

Kinnunen, J., Georgescu, I., 2016, Welfare Effects of Decentralization and Economic Freedoms a Machine Learning Approach; presentation. Unpublished working paper. Accepted to the 48th Annual Conference of Finnish Political Science Association / XLVIII Politiikan tutkimuksen päivät, March 10-11, Helsinki, Finland.  NEW

Decentralization refers to a transfer of authority for public functions from a central government to local governments or to the private sector. Decentralizations often have unintended negative consequences due to various reasons ranging from limited local state capacity/resources to non-local factors.  Also, environments can differ greatly and, e.g., copying decentralization arrangements done successfully in a western country to apply them in a developing country may turn out disappointments. We focus on selected consistent political and market decentralizations to get a largest possible comparable coverage of countries. The connectedness of decentralization measures, economic freedom indicators and welfare measures is studied on global level using machine learning and clustering approach. We gather the data from OECD, World Bank and Credit Suisses Global Wealth database for about 140 countries. We clean it and drop less meaningful factors to end up with a limited number of clusters. In each cluster indicators go hand-in-hand. Next, we interpret these high-level relationships, firstly, focusing on the rationales found in the literature to explain the successes/failures of decentralizations in different clusters. The results are discussed with respect to endogenous/local and exogenous/non-local factors together with different ideological narratives.

Kinnunen, J., Georgescu, I., 2015, Merger and Acquisition Portfolio Selection with Probabilistic and Possibilistic Real Options.

Kinnunen, J., 2014, Suomen organisoituva klassinen liberalismi ja poliittinen talous [In Finnish; Finnish Classical Liberalism and Political Economy; presentation]. Poliittisen talouden tutkimuksen seuran Talouden aika -seminaari, May 30, 2014, Turku, Finland.

Kinnunen, J., 2014, Economic Knowledge from Misesian Utilitarian, Hayekian Evolutionary and Rothbardian Natural Law Perspectives. Accepted to the 4th International Conference on Power, Culture & Economy 2014, Tampere, Finland, August 25-27.

Kinnunen, J., Georgescu, I., 2013,  Venture Capitalist Portfolio Selection under Probabilistic and Possibilistic RiskAccepted to the 20th International Conference on Forecasting Financial Markets, Hannover, Germany, May 29-31, 2013.


This paper views a venture capitalist's (VC's) portfolio selection problem under two types of uncertainties, i.e., probabilistic risk and possibilistic risk. A VC faces such a complex situation, when it has under analysis several potential target companies of which some are handled in probabilistic terms, while others call for a possibilistic treatment. A possibilistic treatment is suitable for cases, where uncertainty is very high. This can be due to lack of available statistical information, because investment targets are often privately owned small companies with limited public information, possibly totally without past sales, without market values, there don't exist comparable firms to allow comparables-based valuations, and their value largely depends on intangibles and their strategic future actions. The VC's portfolio problem corresponds to a situation in which some return rates on investments are described by random variables, while others by fuzzy numbers. This paper unifies probabilistic and possibilistic portfolio selection models resulting in the optimal solution of the mixed portfolio problem faced by a VC. The paper discusses the added value and the usefulness of the two-component approach for a VC and presents of a calculation example with a spreadsheet-tool to demonstrate the practicality of the approach.

Georgescu, I., Kinnunen, J., 2011, Real Option Valuation with Generalized Fuzzy Pay-off Method, Submitted to the 15th Annual  International Conference on Real Options, Turku, Finland, June 15-18, 2011.

The fuzzy expressions presented in this paper can be used to price real options in a possibilistic setting. The paper extends the fuzzy pay-off method for real option valuation of Collan et al, 2009, by formulating real options models with generalized fuzzy numbers. The possibilistic models become more flexible and can be easily adjusted to obtain the optimal solution. The method provides an intuitive perspective for the uncertainty of the parameters of the models.


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