Pausch, Thilo (contributor) - 2003 - [Elektronische Ressource]
-
straint (1) as follows:
E(U (t(y))) = U (R). (4)
Note that (4) is a very general representation of the participation … premium which is implicitly defined by
EU (t(y)) = U (E(t(y))−pi(t(y))), (5)
where E(t(y)) is the lender’s expected repayment … deduced for a given level of E(z) when there is no back-
ground risk ˜z:
EU (t(y))−piU (t(y),E(z)) = R (14)
where EU (t …