A Utility Equivalence Theorem for Concave Functions
نویسندگان
چکیده
Given any two sets of independent non-negative random variables and a non-decreasing concave utility function, we identify sufficient conditions under which the expected utility of sum of these two sets of variables is (almost) equal. We use this result to design a polynomialtime approximation scheme (PTAS) for the utility maximization in a wide variety of risk-averse settings (when the risk a modeled using a concave utility function), that include the asset allocation problem for a risk-averse investor, the risk-averse portfolio allocation problem.
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