Please Note: This seminar will be given online.
|
Actuarial Science and Financial Mathematics seminar series Steven Vanduffel Link to join seminar: Hosted on Zoom |
The optimal payoff for a Yaari investor
Yaari's dual theory of choice under risk is the natural counterpart of expected utility theory. While optimal payoff choice for an expected utility maximizer is well studied in the literature, less is known about the optimal payoff for a Yaari investor. We perform a fairly general analysis and derive optimal payoffs in a variety of relevant cases.
Specifically, we provide the optimal payoff for a Yaari investor under a variance constraint; thus, extending mean-variance optimization to distorted expectation-variance optimization. We also provide the optimal payoff for Yaari investors who aim to outperform an external benchmark.