Research Paper Optimal Initial Capital Induced by the Optimized Certainty Equivalent

Arai, Takuji  ,  Asano, Takao  ,  Nishide, Katsumasa

981pp.1 - 20 , 2017-11-27 , Institute of Economic Research, Kyoto University
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 util- ity functions or other assumptions, we successfully present the OIC as a monetary utility function (negative value of risk measure) for future payoffs with the decision- maker’s concrete criteria in the background.

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