Optimal initial capital induced by the optimized certainty equivalent

Takuji Arai, Takao Asano, Katsumasa Nishide

Research output: Contribution to journalArticle

Abstract

This paper proposes the notion of optimal initial capital (OIC) induced by the optimized certainty equivalent (OCE), as discussed in Ben-Tal and Teboulle (1986) and Ben-Tal and Teboulle (2007). It also investigates the properties of the OIC with various types of utility functions. It is shown that the OIC can be a monetary utility function (negative value of risk measure) for future payoffs with the decision maker's concrete criteria in the background.

Original languageEnglish
Pages (from-to)115-125
Number of pages11
JournalInsurance: Mathematics and Economics
Volume85
DOIs
Publication statusPublished - Mar 2019

Keywords

  • Convex risk measure
  • Monetary utility function
  • Optimal initial capital
  • Optimized certainty equivalent
  • Prudence premium

ASJC Scopus subject areas

  • Statistics and Probability
  • Economics and Econometrics
  • Statistics, Probability and Uncertainty

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