May you can help me undertanding the following conclusion: Suppose we have an agent who has preferences over contingent claims, represented by a concave function $U$. This simply means that ...
It's a simplified model. Suppose $U_t$ is a random variables subject to Lognormal($x_1$, $z_1^2$)distribution. $V_t$ is a random variables subject to Lognormal($x_2$, $z_2^2$)distribution. Suppose ...