Short-Term Investments and Indices of Risk

Heller, Yuval and Schreiber, Amnon (2019): Short-Term Investments and Indices of Risk. Forthcoming in: Theoretical Economics No. forthcoming

Abstract

We study various decision problems regarding short-term investments in risky assets whose returns evolve continuously in time. We show that in each problem, all risk-averse decision makers have the same (problem-dependent) ranking over short-term risky assets. Moreover, in each of these problems, the ranking is represented by the same risk index as in the case of CARA utility agents and normally distributed risky assets.

• Item Type: MPRA Paper
• Language: English
• Keywords: Indices of riskiness, risk aversion, local risk, Wiener process.
• Subjects: D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D81 - Criteria for Decision-Making under Risk and Uncertainty; G - Financial Economics > G3 - Corporate Finance and Governance > G32 - Financing Policy ; Financial Risk and Risk Management ; Capital and Ownership Structure ; Value of Firms ; Goodwill

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