This paper shows how, under a few standard assumptions on the utility function, the monotonicity of absolute risk aversion (ara) and of absolute prudence (ap) are connected. We get some general Propositions on the behaviour of the two functions regarding the positions and the number of their critical points. We also examine some cases where the shape of ap allows to completely determine that of ara.
On the Relationships between Absolute Prudence and Absolute Risk Aversion
MAGGI, MARIO ALESSANDRO;MAGNANI, UMBERTO;MENEGATTI, MARIO
2006-01-01
Abstract
This paper shows how, under a few standard assumptions on the utility function, the monotonicity of absolute risk aversion (ara) and of absolute prudence (ap) are connected. We get some general Propositions on the behaviour of the two functions regarding the positions and the number of their critical points. We also examine some cases where the shape of ap allows to completely determine that of ara.File in questo prodotto:
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