On Aumann and Serrano’s economic index of risk
We study the risk index of an additive gamble proposed in Aumann and Serrano (J Political Econ 116(5):810–836, 2008 ). We establish a generalized duality result for this index and use it to prove Yaari (J Econ Theory 1:315–329, 1969 ) alternative characterization of DARA utilities. A new characterization result for the risk index is obtained through essentially monotonic risk aversion utilities. We also extend the domain of gambles by introducing a price for gambles. We then develop a theory on the risk index for multiplicative gambles. Relative risk aversion functions for multiplicative gambles play the same role as absolute risk aversion functions for additive gambles. Copyright Springer-Verlag Berlin Heidelberg 2014
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Volume (Year): 55 (2014)
Issue (Month): 2 (February)
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