Full-text VersionPublisher’s Version
Risk aversion with two risks : a theoretical extensionJournal of Mathematical Economics
Document TypeJournal article
- Risk aversion,
- Risk apportionment,
- Background risk,
- Expectation dependence,
- Bivariate utility function
AbstractWe identify new conditions ensuring risk aversion in the sense of Arrow–Pratt in a two-argument utility framework in which a financial risk is accompanied by a background risk. Our results generalize the findings of Finkelshtain et al. (1999). We consider a sequence of possible dependence among risks. We also provide an empirical example showing that second-order expectation dependence cannot be ignored in determining risk aversion with two risks.
Publisher StatementCopyright © 2016 Elsevier B.V. All rights reserved.
Citation InformationLi, J. (2016). Risk aversion with two risks : a theoretical extension. Journal of Mathematical Economics, 63, 100-105. doi: 10.1016/j.jmateco.2016.01.002