{"title":"Generalized Optimized Certainty Equivalent with Applications in the Rank-dependent Utility Model","authors":"Qinyu Wu, Tiantian Mao, Taizhong Hu","doi":"10.2139/ssrn.3694866","DOIUrl":null,"url":null,"abstract":"In this paper, we introduce a class of optimized certainty equivalent based on the variational preference, give its dual representation based on ϕ-divergence, and study its equivalent characterization of positive homogeneity and coherence. As applications, we investigate the properties of optimized certainty equivalent based on the rank-dependent utility (RDU) model. The dual representation of RDU-based shortfall risk measure proposed by Mao and Cai (2018) is also presented.","PeriodicalId":239853,"journal":{"name":"ERN: Other Econometrics: Econometric & Statistical Methods - Special Topics (Topic)","volume":"76 1","pages":"0"},"PeriodicalIF":0.0000,"publicationDate":"2020-09-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"ERN: Other Econometrics: Econometric & Statistical Methods - Special Topics (Topic)","FirstCategoryId":"1085","ListUrlMain":"https://doi.org/10.2139/ssrn.3694866","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"","JCRName":"","Score":null,"Total":0}
引用次数: 0
Abstract
In this paper, we introduce a class of optimized certainty equivalent based on the variational preference, give its dual representation based on ϕ-divergence, and study its equivalent characterization of positive homogeneity and coherence. As applications, we investigate the properties of optimized certainty equivalent based on the rank-dependent utility (RDU) model. The dual representation of RDU-based shortfall risk measure proposed by Mao and Cai (2018) is also presented.
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