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Article: Comparative Higher-Order Risk Aversion and Higher-Order Prudence

TitleComparative Higher-Order Risk Aversion and Higher-Order Prudence
Authors
Issue Date2018
PublisherElsevier BV. The Journal's web site is located at http://www.elsevier.com/locate/ecolet
Citation
Economics Letters, 2018, v. 169, p. 38-42 How to Cite?
AbstractIn this paper, we define the nth-degree utility premium as the pain associated with facing the passage from a more favorable risk to a less favorable risk, where the risk increase is specified by the notion of more nth-degree risk. We further define the nth-degree prudence utility premium as the increase in pain when the individual suffers a sure loss. We show that the nth-degree utility premium, normalized by the (n-1)th derivative of the utility function evaluated at the initial wealth, can explain comparative risk aversion of higher orders. On the other hand, the nth-degree prudence utility premium, normalized by the nth derivative of the utility function evaluated at the initial wealth, can explain comparative prudence of higher orders.
Persistent Identifierhttp://hdl.handle.net/10722/254641
ISSN
2015 Impact Factor: 0.603
2015 SCImago Journal Rankings: 0.612

 

DC FieldValueLanguage
dc.contributor.authorWong, KP-
dc.date.accessioned2018-06-21T01:03:55Z-
dc.date.available2018-06-21T01:03:55Z-
dc.date.issued2018-
dc.identifier.citationEconomics Letters, 2018, v. 169, p. 38-42-
dc.identifier.issn0165-1765-
dc.identifier.urihttp://hdl.handle.net/10722/254641-
dc.description.abstractIn this paper, we define the nth-degree utility premium as the pain associated with facing the passage from a more favorable risk to a less favorable risk, where the risk increase is specified by the notion of more nth-degree risk. We further define the nth-degree prudence utility premium as the increase in pain when the individual suffers a sure loss. We show that the nth-degree utility premium, normalized by the (n-1)th derivative of the utility function evaluated at the initial wealth, can explain comparative risk aversion of higher orders. On the other hand, the nth-degree prudence utility premium, normalized by the nth derivative of the utility function evaluated at the initial wealth, can explain comparative prudence of higher orders.-
dc.languageeng-
dc.publisherElsevier BV. The Journal's web site is located at http://www.elsevier.com/locate/ecolet-
dc.relation.ispartofEconomics Letters-
dc.titleComparative Higher-Order Risk Aversion and Higher-Order Prudence-
dc.typeArticle-
dc.identifier.emailWong, KP: kpwongc@hkucc.hku.hk-
dc.identifier.authorityWong, KP=rp01112-
dc.identifier.doi10.1016/j.econlet.2018.05.005-
dc.identifier.hkuros285394-
dc.identifier.volume169-
dc.identifier.spage38-
dc.identifier.epage42-
dc.publisher.placeNetherlands-

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