An individual said to be risk averse if he is unwilling to accept or is indifferent to
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Question:
An individual said to be risk averse if he is unwilling to accept or is indifferent to any actuarially fair gamble.
- What is an actuarially fair gamble?
- How would you express the definition of risk aversion given above mathematically?
- Why does risk aversion imply a concave utility function? Show your answer mathematically and provide explanation for each step.
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