This note gives a simple, but useful characterization of optimism and pessimism represented by a convex and concave shift of probability weighting functions, and applies it to two comparative static analysis.

This note gives a stochastic dominance representation of more optimistic belief in rank dependent expected utility. Applying this observation, we can demonstrate the effect of more optimistic belief on economic decisions and equilibria under risk making comparative static analysis.

This note gives a simple, but useful characterization of optimism and pessimism represented by a convex and concave shift of probability weighting functions, and applies it to two comparative static analysis.

We consider an asset market traded three types of assets: the risk–free asset, the market portfolio and derivatives written on the market portfolio return. We determine a sufficient condition to guarantee that noise risk monotonically changes their derivatives. The condition is that...