Centro de Documentacion de Fundación MAPFRE - Direction and intensity of risk preference at the third order

MAP20180020049

Direction and intensity of risk preference at the third order / Donald C. Keenan, Arthur Snow

Sumario: In expected utility theory, aversion to risk, greater aversion, and the desire to substitute away from risk are each characterized by properties of the Arrow-Pratt index of absolute risk aversion, with comparative statics implications for such decisions as saving. At the third order, however, no single index suffucces. We contrast alternative indices of third-order risk preference and show that the substitution effect of downside risk is governed by the Schwarzian, and that where the degree of prudence governs the magnitude of precautionary saving, the Schwarzian governs the effect of background risk on the marginal rate of time preference

En: The Journal of risk and insurance. - Nueva York : The American Risk and Insurance Association, 1964- = ISSN 0022-4367. - 01/06/2018 Volumen 85 Número 2 - junio 2018 , p. 355-378

1. Teoría de la utilidad . 2. Matemática del seguro . 3. Teoría económica . 4. Matemática financiera . I. Snow, Arthur . II. Title.