Suppose that there is some certain return I with the same utility as A, i.e., U

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Suppose that there is some certain return I^∗ with the same utility as A, i.e.,

¯U

(A) = U(I^∗

). Also, assume that this certainty equivalent return I^∗ is less than the actuarial value of A. What does this tell you about the investor? How much is the investor willing to pay as insurance against the risk of A?

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Investment Valuation And Asset Pricing Models And Methods

ISBN: 9783031167836

1st Edition

Authors: James W. Kolari, Seppo Pynnönen

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Question Posted: Mar 03, 2024 02:00 AM

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Suppose that there is some certain return I with the same utility as A, i.e., U

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Investment Valuation And Asset Pricing Models And Methods

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