Risk aversion
In economics and finance, risk aversion is the tendency of people to prefer outcomes with low uncertainty to those outcomes with high uncertainty, even if the average outcome of the latter is equal to or higher in monetary value than the more certain outcome. Risk aversion explains the inclination to agree to a situation with a more predictable, but possibly lower payoff, rather than another situation with a highly unpredictable, but possibly higher payoff. For example, a risk-averse investor might choose to put their money into a bank account with a low but guaranteed interest rate, rather than into a stock that may have high expected returns, but also involves a chance of losing value.
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- enUtility function of a risk-averse individual
- enUtility function of a risk-loving individual
- enUtility function of a risk-neutral individual
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- enIn economics and finance, risk aversion is the tendency of people to prefer outcomes with low uncertainty to those outcomes with high uncertainty, even if the average outcome of the latter is equal to or higher in monetary value than the more certain outcome. Risk aversion explains the inclination to agree to a situation with a more predictable, but possibly lower payoff, rather than another situation with a highly unpredictable, but possibly higher payoff. For example, a risk-averse investor might choose to put their money into a bank account with a low but guaranteed interest rate, rather than into a stock that may have high expected returns, but also involves a chance of losing value.
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- enCE – Certainty equivalent; E – Expected value of the utility of the uncertain payment W; E – Expected value of the uncertain payment; U – Utility of the certainty equivalent; U – Utility of the expected value of the uncertain payment; U – Utility of the minimal payment; U – Utility of the maximal payment; W0 – Minimal payment; W1 – Maximal payment; RP – Risk premium
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- enIn economics and finance, risk aversion is the tendency of people to prefer outcomes with low uncertainty to those outcomes with high uncertainty, even if the average outcome of the latter is equal to or higher in monetary value than the more certain outcome. Risk aversion explains the inclination to agree to a situation with a more predictable, but possibly lower payoff, rather than another situation with a highly unpredictable, but possibly higher payoff. For example, a risk-averse investor might choose to put their money into a bank account with a low but guaranteed interest rate, rather than into a stock that may have high expected returns, but also involves a chance of losing value.
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- Risk aversion
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- economics.about.com/cs/economicsglossary/g/arrow_pratt.htm
- books.google.com/books%3Fid=P5GsREMbUmAC&pg=PA202
- www.economist.com/science-and-technology/2005/06/23/monkey-business-sense
- www.sigmadewe.com/fileadmin/user_upload/pdf-Dateien/The_Benefit_of_Utilities.pdf
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- Affine transformation
- Affine transformations
- Ambiguity aversion
- Amos Tversky
- Apportionment
- Bank
- Behavioral economics
- Cambridge University
- Category:Actuarial science
- Category:Behavioral finance
- Category:Financial risk modeling
- Category:Utility
- Central moment
- Certainty effect
- Certainty equivalent
- Concave function
- Cumulative prospect theory
- David Spiegelhalter
- Deal or No Deal
- Downside risk
- Economic model
- Economics
- Elasticity of intertemporal substitution
- Entrepreneurship
- Equity premium puzzle
- Expected utility hypothesis
- Expected value
- Exponential utility
- File:Risikoeinstellung.svg
- Finance
- Health and Safety Executive
- Hyperbolic absolute risk aversion
- Hyperbolic function
- Income effect
- Intertemporal choice
- Investor profile
- Isoelastic utility
- John W. Pratt
- Kahneman
- Kenneth Arrow
- L'Hôpital's rule
- Loss aversion
- Marginal utility
- Matthew Rabin
- Mean-preserving spread
- Modern portfolio theory
- Monetary economics
- Neuroeconomics
- Neuromodulation (medicine)
- N-th root
- Opportunity cost
- Optimism bias
- Playground
- Problem gambling
- Prospect theory
- Prudence
- Risk loving
- Risk neutral
- Risk premium
- Risk–return spectrum
- School
- Share capital
- Square root
- St. Petersburg paradox
- Standard deviation
- Statistical risk
- Stochastic dominance
- Substitution effect
- Uncertainty
- Uncertainty avoidance
- Up to
- Utility
- Variance
- Winton Professorship of the Public Understanding of Risk
- SameAs
- 4205948-3
- Aversão ao risco
- Aversió al risc
- Aversión al riesgo
- Aversion au risque
- Averze k riziku
- Avversione al rischio
- Awersja do ryzyka
- m.0183nt
- Q1426675
- Risico-afkerigheid
- Risikoaversion
- Risikoaversion
- Risikoaversjon
- Riskaversion
- Riskdən imtina
- Riskiaversio
- Riskten kaçınma
- S2U7
- Неприятие риска
- שנאת סיכון
- تجنب المخاطر
- ریسکگریزی
- リスク回避
- 风险厌恶
- 위험회피
- Subject
- Category:Actuarial science
- Category:Behavioral finance
- Category:Financial risk modeling
- Category:Utility
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