Optimal initial capital induced by the optimized certainty equivalent

Takuji Arai; Takao Asano; Katsumasa Nishide

doi:10.1016/j.insmatheco.2019.01.006

Optimal initial capital induced by the optimized certainty equivalent

Takuji Arai, Takao Asano, Katsumasa Nishide

Faculty of Economics

Research output: Contribution to journal › Article › peer-review

1 Citation (Scopus)

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.

Original language	English
Pages (from-to)	115-125
Number of pages	11
Journal	Insurance: Mathematics and Economics
Volume	85
DOIs	https://doi.org/10.1016/j.insmatheco.2019.01.006
Publication status	Published - 2019 Mar

Keywords

Convex risk measure
Monetary utility function
Optimal initial capital
Optimized certainty equivalent
Prudence premium

ASJC Scopus subject areas

Statistics and Probability
Economics and Econometrics
Statistics, Probability and Uncertainty

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10.1016/j.insmatheco.2019.01.006

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title = "Optimal initial capital induced by the optimized certainty equivalent",

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 = "Convex risk measure, Monetary utility function, Optimal initial capital, Optimized certainty equivalent, Prudence premium",

author = "Takuji Arai and Takao Asano and Katsumasa Nishide",

note = "Funding Information: We acknowledge the editor, associate editor, and two anonymous reviewers whose comments improved this paper substantially. We are grateful to Chiaki Hara, Shigeo Kusuoka, and Kazutoshi Yamazaki for their helpful comments. This research is partially supported by the MEXT Grant in Aid for Scientific Research (A) #25245046, (A) #16H02026, (B) #15H02965, (B) #16H03619, (C) #17K03797, (C) #15K04936, (C) #16K03558, (C) #17K03806, and the Joint Research Program of KIER, Kyoto University. Publisher Copyright: {\textcopyright} 2019 Elsevier B.V.",

year = "2019",

month = mar,

doi = "10.1016/j.insmatheco.2019.01.006",

language = "English",

volume = "85",

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journal = "Insurance: Mathematics and Economics",

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AU - Arai, Takuji

AU - Asano, Takao

AU - Nishide, Katsumasa

N1 - Funding Information: We acknowledge the editor, associate editor, and two anonymous reviewers whose comments improved this paper substantially. We are grateful to Chiaki Hara, Shigeo Kusuoka, and Kazutoshi Yamazaki for their helpful comments. This research is partially supported by the MEXT Grant in Aid for Scientific Research (A) #25245046, (A) #16H02026, (B) #15H02965, (B) #16H03619, (C) #17K03797, (C) #15K04936, (C) #16K03558, (C) #17K03806, and the Joint Research Program of KIER, Kyoto University. Publisher Copyright: © 2019 Elsevier B.V.

PY - 2019/3

Y1 - 2019/3

N2 - 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.

AB - 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.

KW - Convex risk measure

KW - Monetary utility function

KW - Optimal initial capital

KW - Optimized certainty equivalent

KW - Prudence premium

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DO - 10.1016/j.insmatheco.2019.01.006

M3 - Article

AN - SCOPUS:85060700991

SN - 0167-6687

VL - 85

SP - 115

EP - 125

JO - Insurance: Mathematics and Economics

JF - Insurance: Mathematics and Economics

ER -

Optimal initial capital induced by the optimized certainty equivalent

Abstract

Keywords

ASJC Scopus subject areas

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