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Optimal initial capital induced by the optimized certainty equivalent

Takuji Arai, Takao Asano and Katsumasa Nishide

Insurance: Mathematics and Economics, 2019, vol. 85, issue C, 115-125

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.

Keywords: Optimal initial capital; Optimized certainty equivalent; Monetary utility function; Prudence premium; Convex risk measure (search for similar items in EconPapers)
JEL-codes: D81 G32 G11 D46 (search for similar items in EconPapers)
Date: 2019
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