Indifference pricing with uncertainty averse preferences
We consider the indifference valuation of an uncertain monetary payoff from the perspective of an uncertainty averse decision maker. We study how the indifference valuation depends on the decision maker’s attitudes toward uncertainty. We obtain a characterization of comparative uncertainty aversion and various characterizations of increasing, decreasing, and constant uncertainty aversion.
|Date of creation:||02 May 2011|
|Date of revision:||09 Mar 2012|
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