How to solve the St Petersburg Paradox in Rank-Dependent Models ?

The Cumulative Prospect Theory, as it was specified by Tversky and Kahneman (1992) does not explain the St Petersburg Paradox. This study shows that the solutions proposed in the literature (Blavatskky, 2005; Rieger and Wang, 2006) to guarantee, under rank dependant models, finite subjective utilities for any prospects with finite expected values have to cope with many limitations. In that framework, CPT fails to accommodate both gambling and insurance behavior. We suggested to replace the weighting function generally proposed in the literature with another specification which respects the following properties. 1) In order to guarantee finite subjective values for all prospects with finite expected values, the slope at zero should be finite. 2) To account for the fourfold pattern of risk attitudes, the probability weighting should be strong enough to overcome the concavity of the value function.St Petersburg Paradox, Cumulative Prospect Theory, Probability Weighting, Gambling.

Which Optimal Design For LLDAs?

Lottery-linked deposit accounts are financial assets that provide an interest rate determined by a lottery. The aim of this study is to determine the optimal design of these financial assets (under cumulative prospect theory (CPT) framework). We underline that the weighting functions usually specified in the literature should be re-modeled if we want to apply CPT to finance. We propose to replace them by another functional form that preserves the main characteristics of the inverse S-shape specification, but whose slope at zero is finite. The optimal structure of payments obtained is consistent with the conclusions of behavioral portfolio theory (2000).Lottery-Linked-Deposit Account, Cumulative Prospect Theory, Design optimal, Probability Weighting.

Le mariage efficace de l’épargne et du jeu : une approche historique

Ce papier réalise une étude comparative des coûts et rendements des actifs financiers combinant épargne et jeu, de l’Ancien régime à nos jours. Nous montrons que ces produits sont extrêmement populaires et qu’ils ont toujours permis de récolter des fonds en quantité importante tout en offrant un rendement relativement faible. Ils sont peut-être la solution pour maintenir le niveau d’épargne en cas de chute des taux d’intérêt réels.

Which Optimal Design for Lottery Linked Deposit Accounts?

Lottery-linked deposit accounts (LLDAs) are financial assets that provide an interest rate determined by a lottery. These accounts that combine savings and lottery have become very popular in recent years and in a number of countries (Guillen and Tschoegel). However, their existence cannot be explained in the framework of the expected utility model. Their popularity can only be understood in light of behavioral finance studies, especially if individual preferences are described by Kahneman and Tversky's cumulative prospect theory (1992). Actually, this theory provides a good explanation for the emergence of these deposit accounots by integrating simultaneously risk-averse and risk-seeking behaviors. In this paper, we propose a behavioral analysis of these financial assets by assuming that investors' individuals preferences obey cumulative prospect theory. We study how the structure of prizes of the LLDAs should be framed to appeal to and attract many investors. Our aim is thus to determine the optimal design of these financial assets.info:eu-repo/semantics/publishe

Which optimal design for lottery linked deposit

Lottery-linked deposit accounts (LLDAs) are financial assets that provide an interest rate determined by a lottery. These accounts that combine savings and lot- tery have become very popular in recent years and in a number of countries (Guillen and Tschoegel). However, their existence cannot be explained in the framework of the expected utility model. Their popularity can only be understood in light of behavioral ?nance studies, especially if individual preferences are described by Kahneman and Tversky?s cumulative prospect theory (1992). Actually, this theory provides a good explanation for the emergence of these deposit accounts by integrating simultaneously risk-averse and risk-seeking behaviors. In this paper, we propose a behavioral analysis of these financial assets by assuming that investors individuals preferences obey cumulative prospect theory. We study how the structure of prizes of the LLDAs should be framed to appeal to and attract many investors.Our aim is thus to determine the optimal design of these financial assets.

Which Optimal Design for Lottery Linked Deposit Accounts?

Lottery-linked deposit accounts (LLDAs) are financial assets that provide an interest rate determined by a lottery. These accounts that combine savings and lottery have become very popular in recent years and in a number of countries (Guillen and Tschoegel). However, their existence cannot be explained in the framework of the expected utility model. Their popularity can only be understood in light of behavioral finance studies, especially if individual preferences are described by Kahneman and Tversky's cumulative prospect theory (1992). Actually, this theory provides a good explanation for the emergence of these deposit accounots by integrating simultaneously risk-averse and risk-seeking behaviors. In this paper, we propose a behavioral analysis of these financial assets by assuming that investors' individuals preferences obey cumulative prospect theory. We study how the structure of prizes of the LLDAs should be framed to appeal to and attract many investors. Our aim is thus to determine the optimal design of these financial assets.

Which optimal design for lottery linked deposit

Lottery-linked deposit accounts (LLDAs) are financial assets that provide an interest rate determined by a lottery. These accounts that combine savings and lot- tery have become very popular in recent years and in a number of countries (Guillen and Tschoegel). However, their existence cannot be explained in the framework of the expected utility model. Their popularity can only be understood in light of behavioral ?nance studies, especially if individual preferences are described by Kahneman and Tversky?s cumulative prospect theory (1992). Actually, this theory provides a good explanation for the emergence of these deposit accounts by integrating simultaneously risk-averse and risk-seeking behaviors. In this paper, we propose a behavioral analysis of these financial assets by assuming that investors individuals preferences obey cumulative prospect theory. We study how the structure of prizes of the LLDAs should be framed to appeal to and attract many investors.Our aim is thus to determine the optimal design of these financial assets.info:eu-repo/semantics/publishe

The private equity premium puzzle: a behavioural finance approach

This paper adds new insights on the specificities of entrepreneurs, by focusing on the specificity of entrepreneurs' financial behaviour. First, we provide a detailed review of the literature on the private equity premium puzzle. This review underlines that, from a financial perspective, entrepreneurs differ from non–entrepreneurs because of the low, according to financial theory, risk–return trade–off of their asset portfolio. Our analysis of the literature shows that the higher risk tolerance of entrepreneurs is not sufficient to explain the private equity premium puzzle. Therefore, we apply behavioural finance in order to explain why entrepreneurs, who are aware of their high risk exposure, do still accept low returns. We show how cognitive biases can explain the private equity puzzle. Moreover, we highlight that this puzzle can be understood in light of cumulative prospect theory (Tversky and Kahneman, 1992) and behavioural portfolio theory (Shefrin and Statman, 2000) findings

La résilience entrepreneuriale, un nouvel enjeu de formation ?

International audienceDans quelle mesure la résilience entrepreneuriale peut-elle constituer un nouvel enjeu de formation des étudiants-entrepreneurs ? Forte d’une expérience de plus de 20 années au contact des acteurs de l’entrepreneuriat, l’Académie de l’Entrepreneuriat et de l’Innovation (AEI) a mobilisé son expertise, ses ressources et ses réseaux afin de répondre à cette question3. La démarche proposée conduit à interroger la portée formative des outils et pratiques pédagogiques utilisés pour développer la résilience entrepreneuriale des étudiants-entrepreneurs, notamment dans le contexte d’accompagnement en distanciel apparu avec la crise de la Covid-19