On Aumann and Serrano’s economic index of risk

Minqiang Li

Economic Theory, 2014, vol. 55, issue 2, 415-437

Abstract: We study the risk index of an additive gamble proposed in Aumann and Serrano (J Political Econ 116(5):810–836, 2008 ). We establish a generalized duality result for this index and use it to prove Yaari (J Econ Theory 1:315–329, 1969 ) alternative characterization of DARA utilities. A new characterization result for the risk index is obtained through essentially monotonic risk aversion utilities. We also extend the domain of gambles by introducing a price for gambles. We then develop a theory on the risk index for multiplicative gambles. Relative risk aversion functions for multiplicative gambles play the same role as absolute risk aversion functions for additive gambles. Copyright Springer-Verlag Berlin Heidelberg 2014

Keywords: Risk index; Attractiveness index; Duality; Additive gambles; Multiplicative gambles; C00; D80; D81 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (2)

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Working Paper: On Aumann and Serrano's Economic Index of Risk (2013)
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DOI: 10.1007/s00199-013-0753-3

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