Risk Aversion and Risk Vulnerability in the Continuous and Discrete Case: A Unified Treatment with Extensions: A Unified Treatment with Extensions
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.
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
Mathematics and Statistics
Keywords and Phrases
Delta derivative; Risk aversion; Risk vulnerability; Time scale; Utility function
International Standard Serial Number (ISSN)
Article - Journal
© 2012 Springer Verlag, All rights reserved.
01 May 2012