Expected utility functions are limited to second-order (conditional) risk aversion, while non-expected utility functions can exhibit either first-order or second-order (conditional) risk aversion. We extend the concept of orders of conditional risk aversion to orders of conditional dependent risk aversion. We show that first-order conditional dependent risk aversion is consistent with the frame...

Risk aversion is a fundamental concept in economics used to explain agents' behavior under uncertainty. Risk aversion in auctions has been justified through the many uncertainties faced by bidders and through the large value of bids relative to bidders' assets. In first-price auctions, risk aversion renders more aggress­ sive bidding, while bidding in ascending auc­ tions is not affected, leadi...

We investigate a representative agent consumption-based asset pricing model with two states: low risk aversion and high risk aversion. We explore whether there is a reasonable parameterization capable of generating the empirically observed seasonally-varying equity and Treasury returns documented by Kamstra, Kramer, and Levi (2008). Calibrating the asset-pricing model to observed consumption da...

In this paper we propose the inÞmum of the Arrow-Pratt index of absolute risk aversion as a measure of global risk aversion of a utility function. We then show that, for any given arbitrary pair of distributions, there exists a threshold level of global risk aversion such that all increasing concave utility functions with at least as much global risk aversion would rank the two distributions in...

We consider a formal approach to comparative risk aversion and applies it to intertemporal choice models. This allows us to ask whether standard classes of utility functions, such as those inspired by Kihlstrom and Mirman (1974), Selden (1978), Epstein and Zin (1989) and Quiggin (1982) are well-ordered in terms of risk aversion. Moreover, opting for this model-free approach allows us to establi...

We consider a formal approach to comparative risk aversion and applies it to intertemporal choice models. This allows us to ask whether standard classes of utility functions, such as those inspired by Kihlstrom and Mirman (1974), Selden (1978), Epstein and Zin (1989) and Quiggin (1982) are well-ordered in terms of risk aversion. Moreover, opting for this model-free approach allows us to establi...

This note determines the precise connection between an agent’s attitude towards income risks and his attitude over risks in the underlying consumption space. Our results follow from a general mathematical theory connecting the curvature properties of an objective function with the ray-curvature properties of its dual.

Expected utility functions are limited to second-order (conditional) risk aversion, while non-expected utility functions can exhibit either …rst-order or second-order (conditional) risk aversion. We extend the concept of orders of conditional risk aversion to orders of conditional dependent risk aversion. We show that …rst-order conditional dependent risk aversion is consistent with the framewo...

Bargaining problems are considered where the preferences of the bargainers deviate from expected utility but can be modelled according to rank dependent utility theory. Under rank dependent utility both the utility function and the probability weighting function influence the risk attitude of a decision maker. The same definition of risk aversion leads to two forms of risk aversion: utility ris...

This paper analyzes, for S-shaped value functions, the relations between loss aversion and perceptionally risk aversion (i.e. computed with the perceived probability weights) in Cumulative Prospect Theory . We show that perceptionally risk aversion for mixed sign lotteries is equivalent to weak (or strong) loss aversion, so this is the right assumption to get a sensible behavior towards risk. T...