On Aumann and Serrano's Economic Index of Risk

Li, Minqiang (2013): On Aumann and Serrano's Economic Index of Risk.

Abstract

We study the risk index of an additive gamble proposed in Aumann and Serrano (2008).We establish a generalized duality result for this index and use it to prove Yaari's (1969) alternative characterization of DARA utilities. A new characterization result for the risk index is obtained through essentially monotonic risk aversion utilities. We also extend the domain of gambles by introducing a price for gambles. We then develop a theory on the risk index for multiplicative gambles. Relative risk aversion functions for multiplicative gambles play the same role as absolute risk aversion functions for additive gambles.

• Item Type: MPRA Paper
• Language: English
• Keywords: Risk index Attractiveness index Duality Additive gambles Multiplicative gambles
• Subjects: C - Mathematical and Quantitative Methods > C0 - General > C00 - General; D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D80 - General; D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D81 - Criteria for Decision-Making under Risk and Uncertainty

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