Capital Requirement for Achieving Acceptability

Soumik Pal

Papers from arXiv.org

Abstract: Consider an agent who enters a financial market on day t = 0 with an initial capital amount x. He invests this amount on stocks and the money market, and by day t = T, has generated a wealth W . He is given a convex class of probability measures (called scenarios) and a real-valued function (or floors) corresponding to each scenario. The agent faces the constraints that the expectation of W under each scenario must not be less than the corresponding floor. We call x acceptable if one can start with x and successfully generate W satisfying these constraints. The set of acceptable x is a half-line in R, unbounded from above. We show that under some regularity conditions on the set of scenarios and the floor function, the infimum of this set is given by the supremum of the floors over all scenarios under which S is a martingale.

Date: 2006-01
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://arxiv.org/pdf/math/0601627 Latest version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:math/0601627

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().