Monotone Risk Aversion

Lars Nielsen

No 03-10, Discussion Papers from University of Copenhagen. Department of Economics

Abstract: This paper defines decreasing absolute risk aversion in purely behavioral terms without any assumption of differentiability and shows that a strictly increasing and risk averse utility function with decreasing absolute risk aversion is necessarily differentiable with an absolutely continuous derivative. A risk averse utility function has decreasing absolute risk aversion if and only if it has a decreasing absolute risk aversion density, and if and only if the cumulative absolute risk aversion function is increasing and concave. This leads to a characterization of all such utility functions. Analogues of these results also hold for increasing absolute and for increasing and decreasing relative risk aversion.

Pages: 19 pages
Date: 2003-01
New Economics Papers: this item is included in nep-fin and nep-rmg
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Citations: View citations in EconPapers (1)

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http://www.econ.ku.dk/english/research/publications/wp/2003/0310.pdf/ (application/pdf)

Related works:
Chapter: Monotone Risk Aversion (2006)
Journal Article: Monotone risk aversion (2005)
Working Paper: Monotone Risk Aversion (1997)
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Persistent link: https://EconPapers.repec.org/RePEc:kud:kuiedp:0310

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