The Generalized Arrow-Pratt Coefficient

Sudhir A. Shah ()

Working Papers from eSocialSciences

Abstract: A vector-valued generalized Arrow-Pratt (GAP) coefficients is defined for a utility defined on a Hilbert outcome space. Given risk averse, increasing and twice differentiable utilities on such outcome spaces, comparisons of their risk aversion using GAP coefficients are congruent to comparisons using well-founded decision-theoretic criteria. The Hilbert space setting admits risks embodied in a significant class of random processes, especially second-order processes. We also provide a theoretically well-founded and computationally tractable method for estimating the realized GAP coefficient from observed data when the outcome space is a reproducing kernel Hilbert space

Keywords: comparative risk aversion; equivalence results; generalized Arrow-Pratt coefficients; random processes; reproducing kernel Hilbert spaces; duality; eikonal equation (search for similar items in EconPapers)
Date: 2016-05
Note: Institutional Papers
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