Jean-Pascal Gayant

Local risk aversion in the rank dependent expected utility model: First order versus second order effects

Abstract We evaluate locally the risk premium of a lottery in the framework of the RDEU model as the sum of two terms. The first is a measure of risk aversion, while the second is a measure of spreading aversion.

Rôle de la transformation des probabilités dans la combinaison d'actifs risqués

In this paper we study the combination of risky assets in a portfolio in the Rank Dependent Expected Utility model to exhibit the respective influences of probabilistic risk aversion and decreasing marginal utility. We show that the two properties act differently: probabilistic risk avesion leads the decision maker to minimize the risk brought upon whereas decreasing marginal utility incite her to obtain the best compromise between return and risk.