Risk aversion is the tendency of people to prefer outcomes with low uncertainty to those outcomes with high uncertainty. Example · Utility of money · Measures of risk aversion... |
3 февр. 2020 г. · Let's play a game where your payoff is based on outcome of a fair coin. You get $100 for HEAD and $0 for TAIL. |
Risk-averse behavior is captured by a concave Bernoulli utility function, like a logarithmic function. For the above gamble, a risk-averse person whose ... |
People with concave von Neumann-Morgenstern utility functions are known as risk-averse people. The certainty equivalent of a gamble is an amount of money ... |
decreasing). • If an individual is risk averse then his utility function,. U(x), is concave. • We have studied a standard measure of risk aversion and ... |
This is what a risk-averse person's utility function looks like. This person would give up 14 dollars to have no risk at all. 32 / 68. Page 33. Decision ... |
We saw that a concave utility-of-consequences function yields risk-averse behavior. Con- versely, a person with a convex utility-of-consequences function u ... |
25 мая 2021 г. · A financial agent with utility function u : I → R is called. • risk averse if u(E[X]) ≥ E[u(X)] for all X ∈ X;. • risk neutral if u(E[X]) = E[u( ... |
Expected utility is introduced. Risk aversion and its equivalence with concavity of the utility function (Jensen's inequality) are explained. |
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