Risk vulnerability: a graphical interpretation
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The article gives a graphical interpretation of the concept of risk vulnerability. It shows that in a specific context of binary lotteries the assumption of risk vulnerability adds to prudence what the assumption of decreasing absolute risk aversion adds to risk aversion. We end the presentation showing that results can be extended to the concept of multiplicative risk vulnerability.
KeywordsDecreasing absolute risk aversion Decreasing relative risk aversion Prudence Multiplicative risk vulnerability Risk vulnerability
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- Gollier C. (2001) The economics of risk and time. MIT Press, Cambridge, MAGoogle Scholar