CONDITIONAL CERTAINTY EQUIVALENT

Marco Frittelli () and Marco Maggis ()
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Marco Frittelli: Department of Mathematics, University of Milan, via C. Saldini 50 Milan, 20134, Italy
Marco Maggis: Department of Mathematics, University of Milan, via C. Saldini 50 Milan, 20134, Italy

International Journal of Theoretical and Applied Finance (IJTAF), 2011, vol. 14, issue 01, 41-59

Abstract: In a dynamic framework, we study the conditional version of the classical notion of certainty equivalent when the preferences are described by a stochastic dynamic utility u(x,t,ω). We introduce an appropriate mathematical setting, namely Orlicz spaces determined by the underlying preferences and thus provide a systematic method to go beyond the case of bounded random variables. Finally we prove a conditional version of the dual representation which is a crucial prerequisite for discussing the dynamics of certainty equivalents.

Keywords: Stochastic dynamic utility; conditional certainty equivalent; Musielak-Orlicz spaces; quasiconcavity; dual representation (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (14)

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DOI: 10.1142/S0219024911006255

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