Asset valuation in incomplete markets via the case-based decision theory.

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The case-based decision theory is such a decision theory that the decision maker seeks out similar cases, that she or he measures the distance of similar cases and the decision problem by a measurement function and that she or he makes an optimal decision making by considering similar cases. In the study, applying this decision theory to asset valuation, we estimate the default probabilities of business firms using actual data, and test the validity by comparing them with the default probabilities estimated by the existing methods.