A typical utility function is the logarithmic utility: Clearly this makes sense only for positive values of

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A typical utility function is the logarithmic utility:

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Clearly this makes sense only for positive values of wealth. It is easy to check that, for the logarithmic utility, we have

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Hence, logarithmic utility has decreasing absolute risk aversion, but constant relative risk aversion.

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An Introduction To Financial Markets A Quantitative Approach

ISBN: 9781118014776

1st Edition

Authors: Paolo Brandimarte

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Question Posted: Apr 02, 2024 07:01 AM

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A typical utility function is the logarithmic utility: Clearly this makes sense only for positive values of

Question:

u(x) = log(x).

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An Introduction To Financial Markets A Quantitative Approach

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