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A Note on Risk Acceptance, Bankruptcy Avoidance and Riskiness Measures

  • Chamorro Elosua, Arritokieta
  • Usategui Díaz de Otalora, José María
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    In this work we clarify the relationships between riskiness, risk acceptance and bankruptcy avoidance. We distinguish between the restriction on the current wealth required to make a gamble acceptable to the decision maker and the restriction on the current wealth required to guarantee no bankruptcy if a gamble is accepted. We focus on the measure of riskiness proposed by Foster and Hart.

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    File URL: http://hdl.handle.net/10810/10739
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    Paper provided by University of the Basque Country - Department of Foundations of Economic Analysis II in its series DFAEII Working Papers with number DFAEII;2013-04.

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    Date of creation: 30 Sep 2013
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    Handle: RePEc:ehu:dfaeii:10739
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    Order Information: Postal: Dpto. de Fundamentos del Análisis Económico II, = Facultad de CC. Económicas y Empresariales, Universidad del País Vasco, Avda. Lehendakari Aguirre 83, 48015 Bilbao, Spain
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    1. Robert J. Aumann & Roberto Serrano, 2007. "An Economic Index of Riskiness," Discussion Paper Series dp446, The Federmann Center for the Study of Rationality, the Hebrew University, Jerusalem.
    2. Sergiu Hart, 2011. "Comparing Risks by Acceptance and Rejection," Journal of Political Economy, University of Chicago Press, vol. 119(4), pages 617 - 638.
    3. Hellmann, Tobias & Riedel, Frank, 2013. "The Foster-Hart Measure of Riskiness for General Gambles," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79752, Verein für Socialpolitik / German Economic Association.
    4. Hart, Sergiu & Foster, Dean P., 2013. "A wealth-requirement axiomatization of riskiness," Theoretical Economics, Econometric Society, vol. 8(2), May.
    5. Turan G. Bali & Nusret Cakici & Fousseni Chabi-Yo, 2011. "A Generalized Measure of Riskiness," Management Science, INFORMS, vol. 57(8), pages 1406-1423, August.
    6. Rothschild, Michael & Stiglitz, Joseph E., 1971. "Increasing risk II: Its economic consequences," Journal of Economic Theory, Elsevier, vol. 3(1), pages 66-84, March.
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