NicholsonMTAISECh7IM - 45 Chapter 7 Uncertainty and...

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Unformatted text preview: 45 Chapter 7: Uncertainty and Information Analytical Problems 7.9 HARA utility. This problem shows that the harmonic absolute risk aversion utility function is compatible with other frequently used forms. These other forms are just special cases of the HARA function. 7.10 The resolution of uncertainty. Introduces the notion of "resolution-seeking" behavior. Here the notation is rather cumbersome (see the solutions for clarification). 7.11 More on the CRRA function. This problem stresses the close connection between the relative risk-aversion parameter and the elasticity of substitution. It is a good problem for building an intuitive understanding of risk-aversion in the state preference model. Part d uses the CRRA utility function to examine the “equity-premium puzzle”. 7.12 Graphing risky investments. This problem provides an illustration of investment theory in the state preference framework. 7.13 Taxing risky assets. This is a continuation of Problem 7.12 that analyzes the effect of taxation on risk-taking behavior. 7.14 The portfolio problem with a Normally distributed risky asset. This problem shows how the portfolio problem can be solved explicitly is asset returns are Normal. Normal....
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This note was uploaded on 06/09/2010 for the course AP 4010 taught by Professor Anam,mahmudul during the Fall '10 term at York University.

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NicholsonMTAISECh7IM - 45 Chapter 7 Uncertainty and...

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