Risk Aversion, Prudence and Temperance : A Unified Approach
Risk aversion can be defined either by the negative sign of the second derivative of the utility function or by the rejection of any mean-preserving increase in risk. The more recent notions of prudence and temperance have so far been defined exclusively by the sign of the third and the fourth derivative of the utility function. In this paper we show that, as risk aversion, prudence and temperance can also be interpreted as systematic attitudes towards transformation of a density function.
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|Date of creation:||Jul 1994|
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- EECKHOUDT, Louis & Christian GOLLIER & Harris SCHLESINGER, 1994.
"Changes in Background Risk and Risk Taking Behavior,"
005, Risk and Insurance Archive.
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2848, National Bureau of Economic Research, Inc.
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- Gollier, Christian & John W. PRATT, 1993. "Weak Proper Risk Aversion And The Tempering Effect of Background Risk," Working Papers 018, Risk and Insurance Archive.
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