The Merton problem is the well-known stochastic control of choosing consumption over time, as well an investment mix, to maximize expected constant relative risk aversion (CRRA) utility consumption. formulated and provided analytical solution in 1970; since then a number extensions original formulation have been solved. In this note we identify certainty equivalent problem, i.e., deterministic ...

We study a framework for constructing coherent and convex measures of risk that is inspired by infimal convolution operator, and which is shown to constitute a new general representation of these classes of risk functions. We then discuss how this scheme may be effectively applied to obtain a class of certainty equivalent measures of risk that can directly incorporate preferences of a rational ...

In portfolio selection, strategies on an efficient frontier have been regarded as nondominated solutions because of the compensation to each increase unit of risk, and a rational decision maker has to consider other supplementary decision rules. This paper proposes an approach that helps a rational decision maker identify the best candidate strategy on an efficient frontier by taking the concep...

Ben-Tal and Teboulle [Management Sci., 32 (1986), pp. 1445--1466] introduce the concept of optimized certainty equivalent (OCE) an uncertain outcome as maximum present value a combination cash to be taken out from income at expected utility remaining income. In this paper, we consider two variations OCE. First, modified OCE by maximizing so that combined quantity is in unified value. Second, si...

the purpose of this study was to compare various direct techniques of measuring attitudes toward risk. the equally likely certainty equivalent with a purely hypothetical risky prospect (elce-ph), the equally likely certainty equivalent with a hypothetical but realistic risky prospect (elce-r) and probability of winning demanded (pwd) models were used to elicit the risk attitude of a sample ...

the adverse effect of climate change on agriculture has increased the importance of weather index insurance, particularly in developing countries. by using several econometric models, this study estimated the price and evaluated its effectiveness in rainfall index insurance for rice and wheat in nepal. crop yields associated with seasonal rainfall in three crop reporting districts were applied ...