Distortion risk measures, ambiguity aversion and optimal effort

Christian Robert and Pierre-Emmanuel Thérond
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Christian Robert: LSAF - Laboratoire de Sciences Actuarielle et Financière - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon

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Abstract: We consider the class of concave distortion risk measures to study how choice is influenced by the decision-maker's attitude to risk and provide comparative static results. We also assume ambiguity about the probability distribution of the risk and consider a framework à la Klibanoff, Marinacci and Mukerji (2005) to study the value of information that resolves ambiguity. We show that this value increases with greater ambiguity, with greater ambiguity aversion, and in some cases with greater risk aversion. Finally we examine whether a more risk-averse and a more ambiguity-averse individual will invest in more effort to shift his initial risk distribution to a better target distribution.

Keywords: Ambiguity; dual theory; risk measures; distorsion; optimal effort (search for similar items in EconPapers)
Date: 2014-05
New Economics Papers: this item is included in nep-mic, nep-rmg and nep-upt
Note: View the original document on HAL open archive server: https://hal.science/hal-00813199v1
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Published in ASTIN Bulletin, 2014, 44 (2), pp.277-302. ⟨10.1017/asb.2014.3⟩

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Journal Article: DISTORTION RISK MEASURES, AMBIGUITY AVERSION AND OPTIMAL EFFORT (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-00813199

DOI: 10.1017/asb.2014.3

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