Prudence and higher-order risk attitudes in the rank-dependent utility model Article Swipe
Related Concepts
Prudence
Rank (graph theory)
Order (exchange)
Risk analysis (engineering)
Econometrics
Actuarial science
Computer science
Economics
Business
Mathematics
Philosophy
Combinatorics
Epistemology
Finance
Ruodu Wang
,
Qinyu Wu
·
YOU?
·
· 2024
· Open Access
·
· DOI: https://doi.org/10.48550/arxiv.2412.15350
· OA: W4405713973
YOU?
·
· 2024
· Open Access
·
· DOI: https://doi.org/10.48550/arxiv.2412.15350
· OA: W4405713973
We obtain a full characterization of consistency with respect to higher-order stochastic dominance within the rank-dependent utility model. Different from the results in the literature, we do not assume any condition on the utility functions and the probability weighting functions, such as differentiability or continuity. It turns out that the level of generality that we offer leads to models that do not have a continuous probability weighting function and yet they satisfy prudence. In particular, the corresponding probability weighting function can only have a jump at 1, and must be linear on [0,1).
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