In a dynamic framework, we study the conditional version of the classical notion of certainty equivalent when the preferences are described by a stochastic dynamic utility. We introduce an appropriate mathematical setting, namely Orlicz spaces determined by the underlying preferences and thus provide a systematic method to go beyond the case of bounded random variables. Finally we prove a conditional version of the dual representation which is a crucial prerequisite for discussing the dynamics of certainty equivalents.
Conditional certainty equivalent / M. Frittelli, M. Maggis. - In: INTERNATIONAL JOURNAL OF THEORETICAL AND APPLIED FINANCE. - ISSN 0219-0249. - 14:1(2011), pp. 41-59. [10.1142/S0219024911006255]
Conditional certainty equivalent
M. FrittelliPrimo
;M. MaggisUltimo
2011
Abstract
In a dynamic framework, we study the conditional version of the classical notion of certainty equivalent when the preferences are described by a stochastic dynamic utility. We introduce an appropriate mathematical setting, namely Orlicz spaces determined by the underlying preferences and thus provide a systematic method to go beyond the case of bounded random variables. Finally we prove a conditional version of the dual representation which is a crucial prerequisite for discussing the dynamics of certainty equivalents.File | Dimensione | Formato | |
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