Risk aversion with two risks : a theoretical extension
Document Type
Journal article
Source Publication
Journal of Mathematical Economics
Publication Date
3-2016
Volume
63
First Page
100
Last Page
105
Keywords
Risk aversion, Risk apportionment, Background risk, Expectation dependence, Bivariate utility function
Abstract
We identify new conditions ensuring risk aversion in the sense of Arrow–Pratt in a two-argument utility framework in which a financial risk is accompanied by a background risk. Our results generalize the findings of Finkelshtain et al. (1999). We consider a sequence of possible dependence among risks. We also provide an empirical example showing that second-order expectation dependence cannot be ignored in determining risk aversion with two risks.
DOI
10.1016/j.jmateco.2016.01.002
Print ISSN
03044068
E-ISSN
18731538
Publisher Statement
Copyright © 2016 Elsevier B.V. All rights reserved. Access to external full text or publisher's version may require subscription.
Full-text Version
Publisher’s Version
Language
English
Recommended Citation
Li, J. (2016). Risk aversion with two risks : a theoretical extension. Journal of Mathematical Economics, 63, 100-105. doi: 10.1016/j.jmateco.2016.01.002