My Math Forum  

Go Back   My Math Forum > Science Forums > Economics

Economics Economics Forum - Financial Mathematics, Econometrics, Operations Research, Mathematical Finance, Computational Finance


Reply
 
LinkBack Thread Tools Display Modes
November 3rd, 2015, 01:38 AM   #1
Member
 
Joined: Sep 2013

Posts: 83
Thanks: 0

"Mild" Risk Aversion

Suppose that the average investor in a hedge fund exhibits mild risk aversion
with utility function for wealth (x) of the form
u(x) = 3x 4/5
The average investor has an amount X invested in the fund, where 70% of X is
invested in risky capital assets and the remaining 30% is invested in "risk-free"
money-market assets. Assume that due to a recent crisis within the capital
markets there is now a 35% chance that the value of the risky capital assets
held by the average investor will decrease by 40% during the next few months.
(A) Verify both graphically and mathematically that the average investor
exhibits risk aversion?

Any good guides as to verify it mathematically? (the graphical part is fairly obvious)
Ku5htr1m is offline  
 
Reply

  My Math Forum > Science Forums > Economics

Tags
aversion, mild, risk



Thread Tools
Display Modes


Similar Threads
Thread Thread Starter Forum Replies Last Post
Risk aversion, certainty equivalence, stochastic dominance Tomgrrad Economics 0 October 22nd, 2015 05:44 PM
A "simple" application of dirac delta "shift theorem"...help SedaKhold Calculus 0 February 13th, 2012 11:45 AM
"separate and integrate" or "Orangutang method" The Chaz Calculus 1 August 5th, 2011 09:03 PM
sample exeriment-need help finding "statistic" and "result" katie0127 Advanced Statistics 0 December 3rd, 2008 01:54 PM
terms "non-increasing" or "non-decreasing" Ujjwal Number Theory 2 September 29th, 2008 07:06 AM





Copyright © 2019 My Math Forum. All rights reserved.