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Risk vulnerability: a graphical interpretation

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Eeckhoudt, Louis [IESEG School of Management] Rey, Béatrice [Université Lyon 1]

The article gives a graphical interpretation of the concept of risk vulnerability. It shows that in a specific context of binary lotteries the assumption of risk vulnerability adds to prudence what the assumption of decreasing absolute risk aversion adds to risk aversion. We end the presentation showing that results can be extended to the concept of multiplicative risk vulnerability.

Document type Article de périodique (Journal article) – Article de recherche
Access type Accès interdit
Publication date 2011
Language Anglais
Journal information "Theory and Decision : an international journal for multidisciplinary advances in decision sciences" - Vol. 71, no. 2, p. 227-234 (2011)
Peer reviewed yes
Publisher Springer New York LLC ((United States) New York)
issn 0040-5833
e-issn 1573-7187
Publication status Publié
Affiliations UCL - SSH/LIDAM/CORE - Center for operations research and econometrics
IESEG School of Management -
Université Lyon 1 - ISFA Actuarial School
Keywords Decreasing absolute risk aversion ; Decreasing relative risk aversion ; Prudence ; Multiplicative risk vulnerability ; Risk vulnerability
Links
  1. Franke Günter, Schlesinger Harris, Stapleton Richard C., Multiplicative Background Risk, 10.1287/mnsc.1050.0450
  2. Gollier C. (2001) The economics of risk and time. MIT Press, Cambridge, MA
  3. Gollier Christian, Pratt John W., Risk Vulnerability and the Tempering Effect of Background Risk, 10.2307/2171958
Bibliographic reference Eeckhoudt, Louis ; Rey, Béatrice. Risk vulnerability: a graphical interpretation. In: Theory and Decision : an international journal for multidisciplinary advances in decision sciences, Vol. 71, no. 2, p. 227-234 (2011)
Permanent URL http://hdl.handle.net/2078.1/95066