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preference functional is a distorted expected value function based on prospect theory. Specifically, we exploit Weber's methods … properties of GSR based on the prospect theory and the underlying value function and weighting function in terms of convexity … utility and Yaari's dual theory of choice as special cases. Finally, we propose a computational scheme for calculating GSR …
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Limited liability creates a conflict of interests between policyholders and shareholders of insurance companies. It provides shareholders with incentives to increase the risk of the insurer's assets and liabilities which, in turn, might reduce the value policyholders attach to and premiums they...
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In this paper, we propose formulations and algorithms for robust portfolio optimization under both aleatory uncertainty (i.e., natural variability) and epistemic uncertainty (i.e., imprecise probabilistic information) arising from interval data. Epistemic uncertainty is represented using two...
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