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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...
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Bernard et al. (2015) study an optimal insurance design problem where an individual's preference is of the rank-dependent utility (RDU) type, and show that in general an optimal contract covers both large and small losses. However, their contracts suffer from a problem of moral hazard for paying...
Persistent link: https://www.econbiz.de/10012936949
We study Arrow-Debreu equilibria for a one-period-two-date pure exchange economy with rank-dependent utility agents having heterogeneous probability weighting and outcome utility functions. In particular, we allow the economy to have a mix of expected utility agents and rank-dependent utility...
Persistent link: https://www.econbiz.de/10012913208
We study portfolio selection in a complete continuous-time market where the preference is dictated by the rank-dependent utility. As such a model is inherently time inconsistent due to the underlying probability weighting, we study the investment behavior of sophisticated consistent planners who...
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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...
Persistent link: https://www.econbiz.de/10013100756