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A Note on Risk Acceptance, Bankruptcy Avoidance and Riskiness Measures

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  • Chamorro Elosua, Arritokieta
  • Usategui Díaz de Otalora, José María

Abstract

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.

Suggested Citation

  • Chamorro Elosua, Arritokieta & Usategui Díaz de Otalora, José María, 2013. "A Note on Risk Acceptance, Bankruptcy Avoidance and Riskiness Measures," DFAEII Working Papers 1988-088X, University of the Basque Country - Department of Foundations of Economic Analysis II.
    • Handle: RePEc:ehu:dfaeii:10739
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    References listed on IDEAS

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    1. Robert J. Aumann & Roberto Serrano, 2008. "An Economic Index of Riskiness," Journal of Political Economy, University of Chicago Press, vol. 116(5), pages 810-836, October.
    2. , & ,, 2015. "The Foster-Hart measure of riskiness for general gambles," Theoretical Economics, Econometric Society, vol. 10(1), January.
    3. Sergiu Hart, 2011. "Comparing Risks by Acceptance and Rejection," Journal of Political Economy, University of Chicago Press, vol. 119(4), pages 617-638.
    4. Rothschild, Michael & Stiglitz, Joseph E., 1971. "Increasing risk II: Its economic consequences," Journal of Economic Theory, Elsevier, vol. 3(1), pages 66-84, March.
    5. , P. & ,, 2013. "A wealth-requirement axiomatization of riskiness," Theoretical Economics, Econometric Society, vol. 8(2), May.
    6. Turan G. Bali & Nusret Cakici & Fousseni Chabi-Yo, 2011. "A Generalized Measure of Riskiness," Management Science, INFORMS, vol. 57(8), pages 1406-1423, August.
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    Keywords

    riskiness measure; objective measures; risk acceptance;
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