Optimal Demand for Contingent Claims when Agents have law Invariant Utilities.

We consider a class of law invariant utilities which contains the Rank Dependent Expected Utility (RDU) and the cumulative prospect theory (CPT). We show that the computation of demand for a contingent claim when utilities are within that class, although not as simple as in the Expected Utility (EU) case, is still tractable. Speciﬁc attention is given to the RDU and to the CPT cases. Numerous examples are fully solved.

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Year of publication:	2011
Authors:	Dana, Rose-Anne ; Carlier, Guillaume
Institutions:	Université Paris-Dauphine
Subject:	Constrained Optimization \| Quantiles \| Demand \| Law Invariant Utilities

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Extent:	application/pdf
Series:	Open Access publications from Université Paris-Dauphine.
Type of publication:	Book / Working Paper
Language:	English
Notes:	Published in Mathematical Finance (2011) v.21, p.169-201
Classification:	C0 - Mathematical and Quantitative Methods. General ; D8 - Information and Uncertainty
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10008551610