Repetitive risk aversion

Parkash Chander

No 2005022, LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: This paper introduces and investigates the concept of repetitive risk aversion. The risk aversion of an increasing and concave utility function is repetitive if the fear of ruin, which measures agent's aversion to risking his entire income, is also increasing and concave. This is shown to be equivalent to the behaviorally meaningful condition that the risk premium is increasing at a non-increasing rate with the size of the bet. We find an additional justification for mixed risk aversion, which is known to be stronger than standard (and thus proper) risk aversion, in terms of this concept. We discuss several economic applications of repetitive risk aversion.

Keywords: expected utility; risk aversion; risk premium; monotone function; multiple risks (search for similar items in EconPapers)
JEL-codes: D80 D81 (search for similar items in EconPapers)
Date: 2005-02
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Citations: View citations in EconPapers (1)

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Journal Article: Repetitive risk aversion (2006)
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