Finding the worst-case value of a preference over a set of plausible models is a well-established approach to address the issue of model uncertainty or ambiguity. In this paper, we study the worst-case evaluation of Yaari's dual utility functionals of an aggregate risk under dependence...

We provide conditions on a one-period-two-date pure exchange economy with rank-dependent utility agents under which Arrow-Debreu equilibria exist. When such an equilibrium exists, we derive the state-price density explicitly, which is a weighted marginal rate of substitution between the initial...

We provide a characterization of comparative weak risk aversion and comparative RDEU risk aversion for RDEU preferences and, in particular, we correct a claim made by Quiggin (1993) regarding comparative RDEU risk aversion. We then apply the analysis of comparative risk aversion to a problem of...

Experimental studies show that people's risk preferences depend non-linearly on probabilities, but relatively little is known about how probability weighting influences investment decisions. In this paper we analyze the portfolio choice problem of investors who maximize rank-dependent utility in...

Starting from the requirement that risk measures of financial portfolios should be based on their losses, not their gains, we define the notion of loss-based risk measure and study the properties of this class of risk measures. We characterize loss-based risk measures by a representation theorem...

Risk measures are used not only for financial institutions’ internal risk management but also for external regulation (e.g., in the Basel Accord for calculating the regulatory capital requirements for financial institutions). Though fundamental in risk management, how to select a good risk...