chapter13 - Chapter 13 Risk Attitudes 1 Chapter 13, Risk...

Info iconThis preview shows pages 1–7. Sign up to view the full content.

View Full Document Right Arrow Icon
1 Chapter 13 Risk Attitudes
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
2 Chapter 13, Risk Attitudes Learning Objectives: Utility Function Risk Premium Utility Function Assessment Exponential utility Function
Background image of page 2
3 Risk Attitudes This chapter will discuss the problems associated with risk and return trade-off. Study of preference for decision making It is important for decision maker to consider their attitudes toward risk
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
4 Risk Basic decision on expected monetary values (EMVs) is convenient, but it can lead to decision that may not seem intuitively appealing. Using expected Values to make decision means that the decision maker is considering only the average payoff EMV does not capture the risk attitudes.
Background image of page 4
5 Utility Function The utility Function represents a way to translate dollars into “Utility Units”. A utility function might be specified in terms of : Graph Tabular form Mathematical expression.
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Risk Attitude Utility Function is only a model of an individual’s attitude toward risk. Three different shapes for utility functions:
Background image of page 6
Image of page 7
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 15

chapter13 - Chapter 13 Risk Attitudes 1 Chapter 13, Risk...

This preview shows document pages 1 - 7. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online