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Economic consequences of Nth-degree risk increases and Nth-degree risk attitudes

Jouini, Elyès; Napp, Clotilde; Nocetti, Diego (2013), Economic consequences of Nth-degree risk increases and Nth-degree risk attitudes, Journal of risk and uncertainty, 47, 2, p. 199-224. http://dx.doi.org/10.1007/s11166-013-9176-6

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Type
Article accepté pour publication ou publié
Date
2013
Journal name
Journal of risk and uncertainty
Volume
47
Number
2
Publisher
Springer
Pages
199-224
Publication identifier
Metadata
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Author(s)
Jouini, Elyès
Napp, Clotilde cc
Nocetti, Diego
Abstract (EN)
We study comparative statics of Nth-degree risk increases within a large class of problems that involve bidimensional payoffs and additive or multiplicative risks. We establish necessary and sufficient conditions for unambiguous impact of Nth-degree risk increases on optimal decision making. We develop a simple and intuitive approach to interpret these conditions : novel notions of directional Nth-degree risk aversion that are characterized via preferences over lotteries.
Subjects / Keywords
Comparative statics; Nth degree risk increases; Risk disaggregation
JEL
G11 - Portfolio Choice; Investment Decisions
D9 - Intertemporal Choice
D8 - Information, Knowledge, and Uncertainty