Risk Aversion in the Small and in the Large under Rank-Dependent Utility
Mathematical Finance
2015-12-29 v1 Probability
Portfolio Management
Abstract
Under expected utility the local index of absolute risk aversion has played a central role in many applications. Besides, its link with the "global" concepts of the risk and probability premia has reinforced its attractiveness. This paper shows that, with an appropriate approach, similar developments can be achieved in the framework of Yaari's dual theory and, more generally, under rank-dependent utility.
Keywords
Cite
@article{arxiv.1512.08037,
title = {Risk Aversion in the Small and in the Large under Rank-Dependent Utility},
author = {Louis R. Eeckhoudt and Roger J. A. Laeven},
journal= {arXiv preprint arXiv:1512.08037},
year = {2015}
}
Comments
15 pages, 8 figures