|
Archive@NYU >
Stern School of Business >
Salomon Center >
Macro Finance >
Please use this identifier to cite or link to this item:
http://hdl.handle.net/2451/27360
|
| Title: | Standard Risk Aversion and the Demand for Risky Assets in the Presence
of Background Risk |
| Authors: | Franke, Gunter
Stapleton, Richard C.
Subrahmanyam, Marti G. |
| Issue Date: | 30-Mar-1999 |
| Series/Report no.: | S-MF-99-02 |
| Abstract: | We consider the demand for state contingent claims in the presence of a
zero-mean, non-hedgeable background risk. An agent is defined to be
generalized risk averse if he/she reacts to an increase in background
risk by choosing a demand function for contingent claims with a smaller
slope. We show that the conditions for standard risk aversion: positive,
declining absolute risk aversion and prudence are necessary and
sufficient for generalized risk aversion. We also derive a necessary and
sufficient condition for the agent's derived risk aversion to increase
with a simple increase in background risk. |
| URI: | http://hdl.handle.net/2451/27360 |
| Appears in Collections: | Macro Finance
|
All items in Faculty Digital Archive are protected by copyright, with all rights reserved.
|
