There are indeed some problems that arise from adding risk weighting as a function of probabilities. Check out Bottomley and Williamson (2023) for an alternative model that introduces risk as a function of value, as you suggest. We discuss the contrast between REV and WLU a bit more here. I went with REV here in part because it’s better established, and we’re still figuring out how to work out some of the kinks when applying WLU.
Hi Edo,
There are indeed some problems that arise from adding risk weighting as a function of probabilities. Check out Bottomley and Williamson (2023) for an alternative model that introduces risk as a function of value, as you suggest. We discuss the contrast between REV and WLU a bit more here. I went with REV here in part because it’s better established, and we’re still figuring out how to work out some of the kinks when applying WLU.