Decreasing downside risk aversion and background risk

David Crainich, Louis Eeckhoudt and Olivier Le Courtois
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Louis Eeckhoudt: IÉSEG School Of Management [Puteaux], UCL - Université Catholique de Louvain = Catholic University of Louvain
Olivier Le Courtois: EM - EMLyon Business School

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Abstract: In this paper, we indicate that risk vulnerability can be associated with the concept of downside risk aversion (DRA) and an assumption about its behavior, namely that it is decreasing in wealth. Specifically, decreasing downside risk aversion in the Arrow-Pratt and Ross senses are respectively necessary and sufficient for a background risk to raise the aversion to other independent risks.

Date: 2014-08-01
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Published in Journal of Mathematical Economics, 2014, 53, 59-63 p. ⟨10.1016/j.jmateco.2014.05.009⟩

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Related works:
Journal Article: Decreasing downside risk aversion and background risk (2014)
Working Paper: Decreasing Downside Risk Aversion and Background Risk (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-02313171

DOI: 10.1016/j.jmateco.2014.05.009

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