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Extreme events and entropy: A multiple quantile utility model

Marcello Basili () and Alain Chateauneuf ()

Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) from HAL

Abstract: This paper introduces a multiple quantile utility model of Cumulative Prospect Theory in an ambiguous setting. We show a representation theorem in which a prospect is valued by a composite value function. The composite value function is able to represent asymmetric attitude on extreme events and a rational prudence on ordinary events.

Keywords: Quantiles; Ambiguity; Entropy; Extreme events; Multiple priors (search for similar items in EconPapers)
Date: 2011-11
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Published in International Journal of Approximate Reasoning, Elsevier, 2011, 52 (8), pp.1095-1102. ⟨10.1016/j.ijar.2011.05.005⟩

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DOI: 10.1016/j.ijar.2011.05.005

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