A General Index of Absolute Risk Attitude
Published Online:24 Feb 2010https://doi.org/10.1287/mnsc.1090.1134
Abstract
Many results involving expected utility theory call upon the notions of absolute risk aversion, prudence, and/or temperance. This paper exploits a representation of the Friedman–Savage utility premium (Friedman, M., L. J. Savage. 1948. The utility analysis of choices involving risk. J. Political Econom.56(4) 279–304) to give a general foundation for such coefficients and for their higher-order extensions.
