Risk and Derivative Price

Yusuke Osaki

No 151179, Risk and Sustainable Management Group Working Papers from University of Queensland, School of Economics

Abstract: We consider an asset market traded three types of assets: the risk–free asset, the market portfolio and derivatives written on the market portfolio return. We determine a sufficient condition to guarantee that noise risk monotonically changes their derivatives. The condition is that Arrow–Pratt absolute risk aversion is decreasing and convex.

Keywords: Risk; and; Uncertainty (search for similar items in EconPapers)
Pages: 12
Date: 2007
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Persistent link: https://EconPapers.repec.org/RePEc:ags:uqsers:151179

DOI: 10.22004/ag.econ.151179

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