Risk aversion with two risks: A theoretical extension

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• 作者：Jingyuan Li^a ; ^{jingyuanli@ln.edu.hk" class="auth_mail" title="E-mail the corresponding author} ; Dongri Liu^a ; ^{dongriliu15@gmail.com" class="auth_mail" title="E-mail the corresponding author} ; Jianli Wang^b
• 关键词：Risk aversion ; Risk apportionment ; Background risk ; Expectation dependence ; Bivariate utility function
• 刊名：Journal of Mathematical Economics
• 出版年：2016
• 出版时间：March 2016
• 年：2016
• 卷：63
• 期：Complete
• 页码：100-105
• 全文大小：372 K

文摘

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.