Decreasing downside risk aversion and background risk

David Crainich, Louis Eeckhoudt and Olivier Le Courtois

Journal of Mathematical Economics, 2014, vol. 53, issue C, 59-63

Abstract: In this paper, we show that risk vulnerability can be associated with the concept of downside risk aversion (DRA) and an assumption about its behavior, namely that it is decreasing in wealth. Specifically, decreasing downside risk aversion in the Arrow–Pratt and Ross senses are respectively necessary and sufficient for a zero-mean background risk to raise the aversion to other independent risks.

Keywords: Downside risk aversion; Background risk; Risk vulnerability (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (3)

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Related works:
Working Paper: Decreasing downside risk aversion and background risk (2014)
Working Paper: Decreasing Downside Risk Aversion and Background Risk (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:mateco:v:53:y:2014:i:c:p:59-63

DOI: 10.1016/j.jmateco.2014.05.009

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