Proofs for the New Definitions in Financial Markets

Atilla Aras

Papers from arXiv.org

Abstract: The aim of this study is to present proofs for new theorems. Basic thoughts of new definitions emerge from the decision-making under uncertainty in economics and finance. Shape of the certain utility curve is central to standard definitions in determining risk attitudes of investors. Shape alone determines risk behavior of investors in standard theory. Although the terms risk-averse, risk-loving, and risk-neutral are equivalent to strict concavity, strict convexity, and linearity, respectively, in standard theory, strict concavity or strict convexity, or linearity are valid for certain new definitions. The connection between the curvature of utility curve and risk attitude is broken for the new definitions. For instance, convex utility curve may show risk-averse behavior under new definitions. Additionally, this paper has proved that new definitions are richer than standard ones when shape is considered. Hence, it can be stated that new definitions are broader than standard definitions from the viewpoint of shape. With all of these, it has been demonstrated that the theorems and proofs in this study extend the standard utility theory in an important way.

Date: 2023-09, Revised 2025-10
New Economics Papers: this item is included in nep-ger and nep-upt
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