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 (Paris IX)
Subject:	Constrained Optimization \| Quantiles \| Demand \| Law Invariant Utilities

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Extent:	application/pdf
Series:	Economics Papers from University Paris Dauphine.
Type of publication:	Book / Working Paper
Notes:	Published in Mathematical Finance, 2011, Vol. 21, no. 2. pp. 169-201.Length: 32 pages
Classification:	C0 - Mathematical and Quantitative Methods. General ; D8 - Information and Uncertainty
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10011073758