On inverse utility and third-order effects in the economics of uncertainty

Rabah AMIR and Marcin CZUPRYNA

No 2004045, CORE Discussion Papers from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: We prove that the coefficient of absolute prudence is greater than k - times coefficient of absolute risk aversion for the utility function if and only if the coefficient of absolute prudence is (3-k) times the coefficient of absolute risk aversion for the inverse utility function. Moreover this is also equivalent to (k-2)-concavity of the first derivative of the inverse utility function.

Keywords: absolute prudence; absolute risk aversion; inverse utility function (search for similar items in EconPapers)
JEL-codes: D80 D81 (search for similar items in EconPapers)
Date: 2004-06-01
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