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On the intensity of downside risk aversion

Author

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  • CRAINICH, David
  • EECKHOUDT, Louis

    (Université catholique de Louvain (UCL). Center for Operations Research and Econometrics (CORE))

Abstract

The degree of downside risk aversion (or equivalently prudence) is so far usually measured by -U'''/U''. We propose here another measure, U'''/U', which has interesting properties, different from those related to -U'''/U''. It also appears that the two measures are not mutually exclusive. Instead, they seem to be rather complementary as shown through an economic application.

Suggested Citation

  • CRAINICH, David & EECKHOUDT, Louis, 2007. "On the intensity of downside risk aversion," LIDAM Discussion Papers CORE 2007088, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvco:2007088
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    References listed on IDEAS

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    More about this item

    Keywords

    downside risk aversion; prudence; local and global properties;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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