TY - JOUR
T1 - Multidimensional risk aversion: the cardinal sin
AU - Eeckhoudt, Louis
AU - Pagani, Elisa
AU - Peluso, Eugenio
PY - 2023/1
Y1 - 2023/1
N2 - Attitudes towards multidimensional risk depend both on the shape of the indifference map under certainty and on the degree of concavity of the utility function representing preferences under risk. A decomposition of the risk premium is built on the new notion of “compensated risk aversion”. The balance between the two components is shown to depend on the association of the risks. Several applications are also presented, including the intertemporal model.
AB - Attitudes towards multidimensional risk depend both on the shape of the indifference map under certainty and on the degree of concavity of the utility function representing preferences under risk. A decomposition of the risk premium is built on the new notion of “compensated risk aversion”. The balance between the two components is shown to depend on the association of the risks. Several applications are also presented, including the intertemporal model.
KW - Utility theory
KW - Multivariate risk aversion
KW - Risk premium
KW - Compensated risk aversion
KW - Strength of preferences
KW - Intertemporal risk attitude
UR - http://www.scopus.com/inward/record.url?scp=85136214056&partnerID=8YFLogxK
UR - https://www.mendeley.com/catalogue/97bd15f2-3056-3c57-aa88-016eb0438755/
U2 - 10.1007/s10479-022-04863-5
DO - 10.1007/s10479-022-04863-5
M3 - Article
SN - 1572-9338
VL - 320
SP - 15
EP - 31
JO - Annals of Operations Research
JF - Annals of Operations Research
ER -