Decreasing relative risk premium

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Decreasing relative risk premium. / Hansen, Frank.

In: Journal of Theoretical Economics, Vol. 7, No. 1, 2007, p. Art. 37.

Research output: Contribution to journal › Journal article › Research › peer-review

Harvard

Hansen, F 2007, 'Decreasing relative risk premium', Journal of Theoretical Economics, vol. 7, no. 1, pp. Art. 37. <http://www.bepress.com/bejte/vol7/iss1/art37>

APA

Hansen, F. (2007). Decreasing relative risk premium. Journal of Theoretical Economics, 7(1), Art. 37. http://www.bepress.com/bejte/vol7/iss1/art37

Vancouver

Hansen F. Decreasing relative risk premium. Journal of Theoretical Economics. 2007;7(1):Art. 37.

Author

Hansen, Frank. / Decreasing relative risk premium. In: Journal of Theoretical Economics. 2007 ; Vol. 7, No. 1. pp. Art. 37.

Bibtex

@article{b79daaa0861911dcbee902004c4f4f50,
title = "Decreasing relative risk premium",
abstract = "We consider the risk premium demanded by a decision maker in order to be indifferent between obtaining a new level of wealth with certainty, or to participate in a lottery which either results in unchanged wealth or an even higher level than what can be obtained with certainty. We study preferences such that the corresponding relative risk premium is a decreasing function of present wealth, and we determine the set of associated utility functions. We find a new characterization of risk vulnerability and determine a large set of utility functions, closed under summation and composition, which are both risk vulnerable and have decreasing relative risk premium. We finally introduce the notion of partial risk neutral preferences on binary lotteries and show that partial risk neutrality is equivalent to preferences with decreasing relative risk premium",
keywords = "Faculty of Social Sciences, expected utility theory, relative risk premium, risk vulnerability, preferences on lotteries, partial risk neutrality",
author = "Frank Hansen",
note = "JEL Classification: D8, G12",
year = "2007",
language = "English",
volume = "7",
pages = "Art. 37",
journal = "The B.E. Journal of Theoretical Economics",
issn = "2194-6124",
publisher = "Walterde Gruyter GmbH",
number = "1",

}

RIS

TY - JOUR

T1 - Decreasing relative risk premium

AU - Hansen, Frank

N1 - JEL Classification: D8, G12

PY - 2007

Y1 - 2007

N2 - We consider the risk premium demanded by a decision maker in order to be indifferent between obtaining a new level of wealth with certainty, or to participate in a lottery which either results in unchanged wealth or an even higher level than what can be obtained with certainty. We study preferences such that the corresponding relative risk premium is a decreasing function of present wealth, and we determine the set of associated utility functions. We find a new characterization of risk vulnerability and determine a large set of utility functions, closed under summation and composition, which are both risk vulnerable and have decreasing relative risk premium. We finally introduce the notion of partial risk neutral preferences on binary lotteries and show that partial risk neutrality is equivalent to preferences with decreasing relative risk premium

AB - We consider the risk premium demanded by a decision maker in order to be indifferent between obtaining a new level of wealth with certainty, or to participate in a lottery which either results in unchanged wealth or an even higher level than what can be obtained with certainty. We study preferences such that the corresponding relative risk premium is a decreasing function of present wealth, and we determine the set of associated utility functions. We find a new characterization of risk vulnerability and determine a large set of utility functions, closed under summation and composition, which are both risk vulnerable and have decreasing relative risk premium. We finally introduce the notion of partial risk neutral preferences on binary lotteries and show that partial risk neutrality is equivalent to preferences with decreasing relative risk premium

KW - Faculty of Social Sciences

KW - expected utility theory

KW - relative risk premium

KW - risk vulnerability

KW - preferences on lotteries

KW - partial risk neutrality

M3 - Journal article

VL - 7

SP - Art. 37

JO - The B.E. Journal of Theoretical Economics

JF - The B.E. Journal of Theoretical Economics

SN - 2194-6124

IS - 1

ER -

ID: 1408703