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Optimal Initial Capital Induced by the Optimized Certainty Equivalent

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Listed:
  • Takao Asano

    (Okayama University)

  • Takuji Arai

    (Keio University)

  • Katsumasa Nishide

    (Hitotsubashi University)

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.

Suggested Citation

  • Takao Asano & Takuji Arai & Katsumasa Nishide, 2017. "Optimal Initial Capital Induced by the Optimized Certainty Equivalent," KIER Working Papers 981, Kyoto University, Institute of Economic Research.
    • Handle: RePEc:kyo:wpaper:981
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    File URL: http://www.kier.kyoto-u.ac.jp/DP/DP981.pdf
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    References listed on IDEAS

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    Cited by:

    1. Haktanır, Elif & Kahraman, Cengiz, 2023. "Intuitionistic fuzzy risk adjusted discount rate and certainty equivalent methods for risky projects," International Journal of Production Economics, Elsevier, vol. 257(C).

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    More about this item

    Keywords

    optimal initial capital; optimized certainty equivalence; monetary utility function; prudence premium.;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • D46 - Microeconomics - - Market Structure, Pricing, and Design - - - Value Theory

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