Background Risk and the Demand for State-Contingent Claims
We consider the demand for state-contingent claims, in the presence of an independent zero-mean, non-hedgeable background risk. An agent is defined to be generalized risk averse if he/she chooses a demand function for contingent claims with a smaller slope everywhere, given a simple increase in back...
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| Veröffentlicht in: | Economic theory 2004-02, Vol.23 (2), p.321-335 |
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| container_end_page | 335 |
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| container_title | Economic theory |
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| creator | Franke, Guenter Stapleton, Richard C. Subrahmanyam, Marti G. |
| description | We consider the demand for state-contingent claims, in the presence of an independent zero-mean, non-hedgeable background risk. An agent is defined to be generalized risk averse if he/she chooses a demand function for contingent claims with a smaller slope everywhere, given a simple increase in background risk. We show that the conditions for standard risk aversion, that is positive, declining absolute risk aversion and prudence, are necessary and sufficient for generalized risk aversion. |
| doi_str_mv | 10.1007/s00199-003-0368-1 |
| format | Article |
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| fulltext | fulltext |
| identifier | ISSN: 0938-2259 |
| ispartof | Economic theory, 2004-02, Vol.23 (2), p.321-335 |
| issn | 0938-2259 1432-0479 |
| language | eng |
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| source | Springer Journals; Business Source Complete; JSTOR |
| subjects | Consumption Contingent claims Demand Demand curves Economic models Economic theory Economics Endowments Expected utility Hedging Insurance risk Investment risk Investors Mathematical functions Mathematical models Risk Risk aversion Risk aversion preference Risk theory State Trade Utility functions |
| title | Background Risk and the Demand for State-Contingent Claims |
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