Dual Moments and Risk Attitudes
Published Online:3 Feb 2021https://doi.org/10.1287/opre.2020.2040
Abstract
In decision under risk, the primal moments of mean and variance play a central role to define the local index of absolute risk aversion. In this paper, we show that in the canonical nonexpected utility models provided by the dual theory and rank-dependent utility, dual moments have to be used instead of, or on par with, their primal counterparts to obtain an equivalent index of absolute risk aversion.
