Bid and Ask Prices Tailored to Traders' Risk Aversion and Gain Propension: a Normative Approach

Marta Cardin, Bennett Eisenberg () and Luisa Tibiletti ()
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Bennett Eisenberg: Department of Mathematics University Bethlehem, United States of America
Luisa Tibiletti: Department of Management University of Torino, Italy

International Journal of Business Research and Management (IJBRM), 2012, vol. 3, issue 6, 294-306

Abstract: Risky asset bid and ask prices “tailored” to the risk-aversion and the gain-propension of the traders are set up. They are calculated through the principle of the Extended Gini premium, a standard method used in non-life insurance. Explicit formulae for the most common stochastic distributions of risky returns, are calculated. Sufficient and necessary conditions for successful trading are also discussed.

Keywords: Extended Gini Index; Bid and Ask prices; Pessimism and Optimism indices (search for similar items in EconPapers)
JEL-codes: M0 (search for similar items in EconPapers)
Date: 2012
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Persistent link: https://EconPapers.repec.org/RePEc:aml:intbrm:v:3:y:2012:i:6:p:294-306

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