Separating marginal utility and probabilistic risk aversion
نویسندگان
چکیده
منابع مشابه
Expected Utility and Risk Aversion
This reading describes how people’s aversion to risk affects the decisions they make about investment. Basically, the concepts used to do this analysis emerge naturally when people have expected utility preferences, but not otherwise. So, it illustrates one important way that expected utility is applied. This analysis also makes it possible to illustrate how to do comparative statics. Comparati...
متن کاملLocal Utility and Multivariate Risk Aversion
We revisit Machina’s local utility as a tool to analyze attitudes to multivariate risks. Using martingale embedding techniques, we show that for nonexpected utility maximizers choosing between multivariate prospects, aversion to multivariate mean preserving increases in risk is equivalent to the concavity of the local utility functions, thereby generalizing Machina’s result in [18]. To analyze ...
متن کاملUtility Maximization, Risk Aversion, and Stochastic Dominance
Consider an investor trading dynamically to maximize expected utility from terminal wealth. Our aim is to study the dependence between her risk aversion and the distribution of the optimal terminal payoff. Economic intuition suggests that high risk aversion leads to a rather concentrated distribution, whereas lower risk aversion results in a higher average payoff at the expense of a more widesp...
متن کاملRisk Aversion for Nonsmooth Utility Functions
This paper generalizes the notion of risk aversion for functions which are not necessarily differentiable nor strictly concave. Using an approach based on superdifferentials, we define the notion of a risk aversion measure, from which the classical absolute as well as relative risk aversion follows as a RadonNikodym derivative if it exists. Using this notion, we are able to compare risk aversio...
متن کاملRisk Aversion Asymptotics for Power Utility Maximization
We consider the economic problem of optimal consumption and investment with power utility. We study the optimal strategy as the relative risk aversion tends to in nity or to one. The convergence of the optimal consumption is obtained for general semimartingale models while the convergence of the optimal trading strategy is obtained for continuous models. The limits are related to exponential an...
متن کاملذخیره در منابع من
با ذخیره ی این منبع در منابع من، دسترسی به آن را برای استفاده های بعدی آسان تر کنید
ژورنال
عنوان ژورنال: Theory and Decision
سال: 1994
ISSN: 0040-5833,1573-7187
DOI: 10.1007/bf01075296