Certainty Equivalent in Capital Markets

We generalize the classical concept of a certainty equivalent to a model where an investor can trade on a capital market with several future trading dates.We show that if a riskless asset is traded and the investor has a CARA utility then our generalized certainty equivalent can be evaluated using the sum of discounted one-period certainty equivalents. This is not true, if the investor hasa HARA utility.

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Year of publication:	2003-01-23
Authors:	Kruschwitz, Lutz ; Löffler, Andreas
Publisher:	Universität <Hannover> / Wirtschaftswissenschaftliche Fakultät
Subject:	Finanzierung \| finance \| Kapitalkosten \| Kapitalmarkt

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Extent:	115712 bytes 12 p. application/pdf
Series:	Universität Hannover - Wirtschaftswissenschaftliche Fakultät - Diskussionspapiere Universität Hannover - Wirtschaftswissenschaftliche Fakultät - Diskussionspapiere ; 2003, 272
Type of publication:	Book / Working Paper
Language:	English
Classification:	D81 - Criteria for Decision-Making under Risk and Uncertainty ; D92 - Intertemporal Firm Choice and Growth, Investment, or Financing ; Financial theory ; Procurement of capital. General ; Individual Working Papers, Preprints ; No country specification
Source:	USB Cologne (business full texts)

Persistent link: https://www.econbiz.de/10005842089