How is absolute risk aversion function defined
How is absolute risk aversion function defined?
Expert
The last point, in the above leads to definitions for measurement of risk aversion. The absolute risk aversion function is defined as
A(W) = - (U’’(W))/(U’(W))
The relative risk aversion function is defined as
R (W) =- (WU’’ (W))/ (U’ (W)) = WA (W)
Utility functions are frequently used to analyse random events.
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