Objective & Utility | Risk Tolerance
- Select dialog box launcher within the Model | Objective & Utility group and click on the Risk Tolerance tab.
Note: you may only use one of the Built-In or Custom Utility functions not both. A custom function is only necessary when the exponential utility function is inappropriate. If you use a custom function, you must specify functions to covert both to and from utiles (i.e., the utility function and its inverse).
Using the Built-in Utility Function
- In the section labeled "Built-in exponential utility function", enter the value, variable name, or expression for the risk tolerance coefficient.
- You must leave the two edit boxes beneath the section labeled "Custom utilityquot; blank.
Using Custom Utility Functions
- You can specify any utility function you would like as long as the function is invertible.
- In the "Custom utility" section, enter into the edit box labeled "To utiles" the expression for converting the objective function units to utiles (the utility function).
- In the edit box labeled "From utiles", enter the expression for converting utiles back to the units of the objective function (the inverse of the utility function).
Versions: DPL Professional, DPL Enterprise, DPL Portfolio