A General Index of Inherent Risk

Adi Schnytzer () and Sara Westreich
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Adi Schnytzer: Department of Economics and Logistics,respectively,Bar Ilan University,Israel

No 2009-9, Working Papers from Bar-Ilan University, Department of Economics

Abstract: We extend the pioneering work of Aumann and Serrano by presenting an index of inherent riskiness of a gamble having the desirable properties of their index, while being applicable to gambles with either positive or negative expectations. As such, our index provides a measure of riskiness which is of use for both risk lovers and risk aversive gamblers, and is defined for all discrete and a large class of continuous gambles. We analyze abstract properties of our index, and present in addition three empirical applications - roulette, horse betting market and US options traded on financial stocks between 2005 and 2007.

Date: 2009-04
New Economics Papers: this item is included in nep-rmg and nep-upt
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