The Optimal Payoff for a Yaari Investor

23 Pages Posted: 13 Jan 2021 Last revised: 20 Aug 2021

See all articles by Kris Boudt

Kris Boudt

Ghent University; Vrije Universiteit Brussel; Vrije Universiteit Amsterdam

Kirill Dragun

Vrije Universiteit Brussel (VUB)

Steven Vanduffel

Vrije Universiteit Brussel (VUB)

Date Written: December 19, 2020

Abstract

Yaari's dual theory of choice is the natural counterpart of expected utility theory. While the optimal payoff choice for an expected utility maximizer is well studied in the literature, substantially less is known about the optimal payoff for a Yaari investor. In the first part of the paper, we study well-posedness of the optimal payoff problem for a Yaari investor and derive explicit solutions in a variety of relevant cases. In the second part of the paper, we extend the results to derive optimal payoffs for Yaari investors who wish to beat an external benchmark.

Keywords: Preferences, Optimization, Hoeffding-Fréchet bounds.

Suggested Citation

Boudt, Kris and Dragun, Kirill and Vanduffel, Steven, The Optimal Payoff for a Yaari Investor (December 19, 2020). Available at SSRN: https://ssrn.com/abstract=3751644 or http://dx.doi.org/10.2139/ssrn.3751644

Kris Boudt

Ghent University ( email )

Sint-Pietersplein 5
Gent, 9000
Belgium

Vrije Universiteit Brussel ( email )

Pleinlaan 2
http://www.vub.ac.be/
Brussels, 1050
Belgium

Vrije Universiteit Amsterdam ( email )

De Boelelaan 1105
Amsterdam, ND North Holland 1081 HV
Netherlands

Kirill Dragun

Vrije Universiteit Brussel (VUB) ( email )

Pleinlaan 2
http://www.vub.ac.be/
Brussels, 1050
Belgium

Steven Vanduffel (Contact Author)

Vrije Universiteit Brussel (VUB) ( email )

Pleinlaan 2
Brussels, Brabant 1050
Belgium

HOME PAGE: http://www.stevenvanduffel.com

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