Risk Aversion and Risk Vulnerability in the Continuous and Discrete Case: A Unified Treatment with Extensions: A Unified Treatment with Extensions
Abstract
This paper discusses utility functions for money, where allowable money values are from an arbitrary nonempty closed subset of the real numbers. Thus, the classical case, where this subset is a closed interval (bounded or not) of the real line, is included in the study. The discrete case, where this subset is the set of all integer numbers, is also included. In a sense, the discrete case (which has not been addressed in the literature thus far) is more suitable for real-world applications than the continuous case. In this general setting, the concepts of risk aversion and risk premium are defined, an analogue of Pratt's fundamental theorem is proved, and temperance, prudence, and risk vulnerability are examined.
Recommended Citation
M. Bohner and G. M. Gelles, "Risk Aversion and Risk Vulnerability in the Continuous and Discrete Case: A Unified Treatment with Extensions: A Unified Treatment with Extensions," Decisions in Economics and Finance, vol. 35, no. 1, pp. 1 - 28, Springer Verlag, May 2012.
The definitive version is available at https://doi.org/10.1007/s10203-011-0112-4
Department(s)
Mathematics and Statistics
Second Department
Economics
Keywords and Phrases
Delta derivative; Risk aversion; Risk vulnerability; Time scale; Utility function
International Standard Serial Number (ISSN)
1593-8883; 1129-6569
Document Type
Article - Journal
Document Version
Citation
File Type
text
Language(s)
English
Rights
© 2012 Springer Verlag, All rights reserved.
Publication Date
01 May 2012
Comments
This work was supported by the NSF Interdisciplinary Grant #0624127, "Time Scales in Economics and Finance."