A generalization of Pratt-Arrow measure to nonexpected-utility preferences and inseparable probability and utility

• 成果类型: Article
• 署名作者: Nau, RF
• 署名单位: Duke University
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.49.8.1089.16398
• 发表日期: 2003
• 页码: 1089-1104
• 关键词: criteria for decision making under risk and uncertainty; risk aversion; Uncertainty aversion; expected-utility theory; nonexpected-utility; smooth preferences

摘要

The Pratt-Arrow measure of local risk aversion is generalized for the n-dimensional state-preference model of choice under uncertainty in which the decision maker may have inseparable subjective probabilities and utilities, unobservable stochastic prior wealth, and/or smooth nonexpected-utility preferences. Local risk aversion is measured by the matrix of derivatives of the decision maker's risk-neutral probabilities, without reference to true subjective probabilities or riskless wealth positions, and comparative risk aversion is measured without requiring agreement on true probabilities. Risk-neutral probabilities and their derivatives are shown to be sufficient statistics for approximately optimal investment and financing decisions in complete markets for contingent claims.