Working paper
The Many Faces of Multivariate Risk-Taking: Risk Apportionment for Desirable and Undesirable Attributes
SSRN
06/13/2022
DOI: 10.2139/ssrn.4129251
Abstract
Many decisions under risk involve alternatives with multiple and possibly non-financial attributes. In this paper, we characterize risk apportionment preferences in a bivariate setting. We distinguish between desirable and undesirable attributes and show how to adapt the theory to obtain consistent results. We extend the definitions of correlation aversion, cross-prudence and cross-temperance in terms of simple lotteries to the case of undesirable attributes, provide a general characterization based on signs of cross-derivatives of the utility function, and discuss specific multivariate models for applications. Our results show how to unlock the powerful machinery of risk apportionment in the many situations in which decision-makers face undesirable attributes
Details
- Title: Subtitle
- The Many Faces of Multivariate Risk-Taking: Risk Apportionment for Desirable and Undesirable Attributes
- Creators
- Richard PeterBéatrice Rey - Université de Lyon
- Resource Type
- Working paper
- Publisher
- SSRN
- DOI
- 10.2139/ssrn.4129251
- Number of pages
- 42 pages
- Language
- English
- Date posted
- 06/13/2022
- Date updated
- 06/29/2022
- Academic Unit
- Finance
- Record Identifier
- 9984380630402771
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