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Utility-based acceptability indices

Author

Listed:
  • Marcin Pitera
  • Mikl'os R'asonyi

Abstract

In this short paper we introduce a new class of performance measures based on certainty equivalents defined via scaled utility functions. We analyse their properties, show that the corresponding portfolio optimization problem is well-posed under generic conditions, and analyse the link between portfolio dynamics, benchmark process, and utility function choice in the long-run setting.

Suggested Citation

  • Marcin Pitera & Mikl'os R'asonyi, 2023. "Utility-based acceptability indices," Papers 2310.02014, arXiv.org.
    • Handle: RePEc:arx:papers:2310.02014
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    References listed on IDEAS

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    2. Tomasz R. Bielecki & Igor Cialenco & Ismail Iyigunler & Rodrigo Rodriguez, 2013. "Dynamic Conic Finance: Pricing And Hedging In Market Models With Transaction Costs Via Dynamic Coherent Acceptability Indices," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 16(01), pages 1-36.
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    11. Marcin Pitera & Thorsten Schmidt, 2022. "Estimating and backtesting risk under heavy tails," Papers 2201.10454, arXiv.org, revised Jan 2022.
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    16. Marcelo Brutti Righi, 2021. "Star-shaped acceptability indexes," Papers 2110.08630, arXiv.org, revised Jun 2022.
    17. Alexander Cherny & Dilip Madan, 2009. "New Measures for Performance Evaluation," The Review of Financial Studies, Society for Financial Studies, vol. 22(7), pages 2371-2406, July.
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