Changes in background risk and risk taking behavior
Article Abstract:
There are multiple risks and incomplete markets that exist when economic decisions are made during uncertainty. Consequently, the choice of endogenous risks are done with the presence of exogenous 'background risks' which are not in the control of the agent. It seems natural to assume that an exogenous deterioration in background wealth will lead people to take more care in other areas. Background wealth deteriorations in the forms of general first- and second-degree stochastic dominance changes in risk are analyzed.
Publication Name: Econometrica
Subject: Mathematics
ISSN: 0012-9682
Year: 1996
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Increasing risk, decreasing absolute risk aversion and diversification
Article Abstract:
The definition of riskiness is presented under a situation characterized by risk averse investors whose utility function shows a decreasing aversion trend. The condition that is obtained when a certain variable is considered riskier than another is corollarily described using the cumulative distribution of the variables as factors. Mean preserving spread functions are also used in the analysis.
Publication Name: The Journal of Mathematical Economics
Subject: Mathematics
ISSN: 0304-4068
Year: 1995
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Risk aversion in RDEU
Article Abstract:
A study on risk aversion in rank-dependent expected utility theory is presented.
Publication Name: The Journal of Mathematical Economics
Subject: Mathematics
ISSN: 0304-4068
Year: 2006
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