Decreasing absolute risk aversion: some clarification

Moez Abouda ()
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Moez Abouda: Centre d'Economie de la Sorbonne et BESTMOD de Tunis, https://centredeconomiesorbonne.univ-paris1.fr

Documents de travail du Centre d'Economie de la Sorbonne from Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne

Abstract: La Vallée (1968), in the expected utility model, gives a sufficient condition for positivity of the bid-selling spread. In this article, we show that this sufficient condition, namely decreasing absolute risk aversion (DARA) is in fact necessary. Moreover, we prove that the expected utility hypothesis and differentiability of the utility function are not required

Keywords: DARA; NARA; Bid-selling spread; perfect hedging; risk premium (search for similar items in EconPapers)
JEL-codes: D80 D81 G12 (search for similar items in EconPapers)
Pages: 7 pages
Date: 2008-03
New Economics Papers: this item is included in nep-upt
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:mse:cesdoc:b08024

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