.A risk measure that is consistent with the second-order stochastic dominance and additive for sums of independent random variables can be represented as a weighted entropic risk measure (WERM). The expected utility maximization problem with risk controlled by WERM and a related risk minimization problem are investigated in this paper. The latter is equivalent to a problem of maximizing a weighted average of constant-absolute-risk-aversion certainty equivalents. The solutions of all the optimization problems are explicitly characterized, and an iterative method is provided to obtain the solutions numerically.
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Jianming Xia (2024) studied this question.
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