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Monotonicity of asset price toward higher changes in risk

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  • Jokung, Octave

Abstract

This note gives the conditions on preferences to guarantee the monotonicity of asset prices when the payoffs of the risky asset change in the sense of the Nth stochastic dominance and with an Nth degree increase in risk. Those conditions are expressed in terms of the sign of the successive derivatives of the utility function coupled with the relative risk aversion of higher orders less than their benchmark values.

Suggested Citation

  • Jokung, Octave, 2013. "Monotonicity of asset price toward higher changes in risk," Economics Letters, Elsevier, vol. 118(1), pages 195-198.
    • Handle: RePEc:eee:ecolet:v:118:y:2013:i:1:p:195-198
    DOI: 10.1016/j.econlet.2012.09.018
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    References listed on IDEAS

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    Cited by:

    1. Gollier, Christian, 2021. "A general theory of risk apportionment," Journal of Economic Theory, Elsevier, vol. 192(C).

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    More about this item

    Keywords

    Monotonicity; Increase in risk; Risk aversion; Stochastic dominance;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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