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Optimal Initial Capital Induced by the Optimized Certainty Equivalent

Takao Asano (), Takuji Arai () and Katsumasa Nishide ()
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Takao Asano: Okayama University
Takuji Arai: Keio University
Katsumasa Nishide: Hitotsubashi University

No 981, KIER Working Papers from Kyoto University, Institute of Economic Research

Abstract: This paper proposes the notion of optimal initial capital (OIC) induced by the optimized certainty equivalent (OCE) discussed in Ben-Tal and Teboulle (1986) and Ben-Tal and Teboulle (2007), and investigates the properties of the OIC with various types of utility functions. By providing its several properties with different utility functions or other assumptions, we successfully present the OIC as a monetary utility function (negative value of risk measure) for future payoffs with the decisionmaker's concrete criteria in the background.

Keywords: optimal initial capital; optimized certainty equivalence; monetary utility function; prudence premium. (search for similar items in EconPapers)
JEL-codes: D81 G32 G11 D46 (search for similar items in EconPapers)
Pages: 21pages
Date: 2017-12
New Economics Papers: this item is included in nep-upt
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