Forward rank‐dependent performance criteria: Time‐consistent investment under probability distortion
Forward rank‐dependent performance criteria: Time‐consistent investment under probability distortion
Abstract We introduce the concept of forward rank‐dependent performance criteria, extending the original notion to forward criteria that incorporate probability distortions. A fundamental challenge is how to reconcile the time‐consistent nature of forward performance criteria with the time‐inconsistency stemming from probability distortions. For this, we first propose two distinct definitions, …