Effects of background risks on cautiousness with an application to a portfolio choice problem

• 成果类型: Article
• 署名作者: Hara, Chiaki; Huang, James; Kuzmics, Christoph
• 署名单位: Kyoto University; Lancaster University; Northwestern University
• 刊物名称: JOURNAL OF ECONOMIC THEORY
• ISSN/ISSBN: 0022-0531
• DOI: 10.1016/j.jet.2010.08.005
• 发表日期: 2011
• 页码: 346-358
• 关键词: Risk aversion; risk tolerance; cautiousness; Portfolio insurance; Idiosyncratic risks; Background risks; incomplete markets

摘要

We provide necessary and sufficient conditions on an individual's expected utility function under which any zero-mean idiosyncratic risk increases cautiousness (the derivative of the reciprocal of the absolute risk aversion), which is the key determinant for this individual's demand for options and portfolio insurance. (C) 2010 Elsevier Inc. All rights reserved.