Monotone risk aversion

Nielsen, Lars

Monotone risk aversion

Economic Theory, 2005, vol. 25, issue 1, 203-215

Abstract: This paper defines decreasing absolute risk aversion in purely behavioral terms without any assumption of differentiability and shows that a strictly increasing and risk averse utility function with decreasing absolute risk aversion is necessarily differentiable with an absolutely continuous derivative. A risk averse utility function has decreasing absolute risk aversion if and only if it has a decreasing absolute risk aversion density, and if and only if the cumulative absolute risk aversion function is increasing and concave. This leads to a characterization of all such utility functions. Analogues of these results also hold for increasing absolute and for increasing and decreasing relative risk aversion. Copyright Springer-Verlag Berlin/Heidelberg 2005

Keywords: Absolute risk aversion; Relative risk aversion; Decreasing risk aversion; Increasing risk aversion; Cumulative absolute risk aversion; Cumulative relative risk aversion. (search for similar items in EconPapers)
Date: 2005
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Citations: View citations in EconPapers (5)

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Related works:
Working Paper: Monotone Risk Aversion (2003)
Working Paper: Monotone Risk Aversion (1997)
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DOI: 10.1007/s00199-004-0471-y

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